New Retirement Reverse Mortgage Guide

8/9/2019 New Retirement Reverse Mortgage Guide

http://slidepdf.com/reader/full/new-retirement-reverse-mortgage-guide 1/12

Is a Reverse Mortgage Right for You?NewRetirement’s Guide to Reverse Mortgages

www.NewRetirement.com 866.441.0246

NewRetirement

http://www.newretirement.com/




About NewRetirementNewRetirement is a leading destination site dedicated to helping people who are concerned aboutretirement find the information they need to create a secure future for themselves.

We offer unbiased authoritative information about products and services that can enhance your financiawell being. In addition, we can match you to prescreened service providers like reverse mortgagelenders, insurance brokers, mortgage refinance lenders, certified financial planners and other retirementexperts.

What is a Reverse Mortgage?

Are You Eligible For a Reverse Mortgage?

A Case Study in Reverse Mortgages

Finding a Licensed and Reputable Reverse Mortgage Lender

Pros and Cons of a Reverse Mortgage and Special Considerations

Different Types of Reverse Mortgages and Ways to Get Your Benefit

Frequently Asked Questions

3

4

5-6

7

8-9

10

11

Table of Contents

Copyright 2010 www.NewRetirement.com 866.441.0246





A Reverse Mortgage is a type of loan for homeownersover the age of 62 that turns the equity saved up in your home into cash.

When you secure a Reverse Mortgage, you are able to

use the money from your own home equity while alsoliving in and retaining ownership of your home.

In some ways, a Reverse Mortgage is kind of like borrowing against your own retirementsavings account or securing an advance on your own paycheck. You are borrowing your own

money – your own home equity.

However, with a Reverse Mortgage all interest and fees and loan payments are accruedagainst the home equity so there are no ongoing costs associated with this loan.

Reverse Mortgage borrowers are not required to make any payments on a Reverse Mortgage as longas they reside in the home and the taxes and insurance on the home remain current. When theborrowers move out of the home or pass away, they or their heirs generally have 6-12 months to sell thehome to pay back the Reverse Mortgages.

And, any proceeds from the sale of the home beyond the amount owed on the Reverse Mortgage maybe kept by the borrowers or their heirs. If the home sells for less than the Reverse Mortgage is worth,the borrower isn’t personally responsible for the remainder of the money—the lender takes the loss.

What is a Reverse Mortgage?

“ “

Official Definition

The US Department of Housing and Urban Development offers this definition of a Reverse Mortgage:

A Reverse Mortgage is a special type of home loan that lets a homeowner convert the equity in

his or her home into cash. The equity built up over years of home mortgage payments can be

paid to the homeowner in a lump sum, in a stream of payments, or as a supplement to Social Security or other retirement funds. But unlike a traditional home equity loan or second mortgage,

no repayment is required until the borrowers no longer use the home as their

principal residence.

NO MORE MORTGAGE PAYMENTSFor most people, the biggest benefit of a Reverse Mortgage is that the loan pays off

your existing mortgage and eliminates all ongoing mortgage payments.


http://www.newretirement.com/Services/Reverse_Mortgage.aspx






To be eligible for a Reverse Mortgage, you must meet the three mainrequirements:

How Much Money Can You Accesswith a Reverse Mortgage?

The proceeds from a Reverse Mortgagecan be used in any way the borrower chooses.

Some popular uses for the proceeds of aReverse Mortgage include:

Improving the monthly householdbudget

Health care

Home repairsOutstanding bills

Paying off debt

Travel

Large purchases (car, appliances)

Long Term Care costs

Are You Eligible for a Reverse Mortgage?

Age: All titleholders on the home must be 62 years of ageor older

Equity: The property must have sufficient equity remainingin it to eliminate any existing mortgages or liens using theReverse Mortgage.

In practice, this means you generally must have at least 50%equity in the home in order to qualify, though the precise limitdepends on your age.

Property Type: The home must be of a type approved by theFHA for Reverse Mortgages.

Property eligibility can be more complex than age. Reverse Mortgages are currently not availableon co-ops, for example, though a change in that requirement is anticipated. Bed & breakfasts andworking farms are also ineligible, as are manufactured homes built before 1976. The borrower must own the land the home is built on, the home must be on a permanent foundation, and thehome must pass an FHA inspection.

As there are many quirks in determining property eligibility, it is best to speak with a loan officer before embarking on the process to make sure that your home is eligible.

1

2

3

The amount of money you can get from a ReverseMortgage is determined using a calculation thattakes into account:

To immediately determine how much money youmight be eligible to receive from your home, you canuse NewRetirement’s Reverse Mortgage Calculator .

Your age

Current interest rates

The value of your property

Any outstanding mortgage or other lien onyour property

Maximum loan limits as determined byHUD and the FHA


http://www.newretirement.com/Services/Reverse_Mortgage_Who_Should_Consider.aspx



https://www.newretirement.com/Services/Reverse_Mortgage_Calculator.aspx








Like many retirees, Warren (71) and Carol (67) Foster are facingtough times. Their fixed income is falling behind their expenses –especially as their medical costs rise. They are exploring aReverse Mortgage on their single family home in Littleton,Colorado.

The Numbers:While every Reverse Mortgage loan will be different,the Fosters offer a fairly typical scenario.

The current appraised value of the Fosters’ homeis $230,000.

They owe $35,000 on their existing mortgage andalso $20,000 on a Home Equity Line of Credit, equaling $55,000 in debt against the home.

They are paying $850 a month on their mortgage and HELOC.

With an adjustable rate Reverse Mortgage, the Fosters total loan amount is $95,000. A fixed rateReverse Mortgage offers them $115,000

However, the Fosters can not access the full $95,000-$115,000. (The liens on the home must bepaid with this money and fees are also subtracted.)

On these amounts, the fees are approximately 5% of the loan amount, or $5,000.

After paying the fees and all mortgage obligations, a Reverse Mortgage enables the Fosters to:

Eliminate house payments, reducing expenses by $850 a month

Access $35,000 in cash, a line of credit or an annuitized monthly income stream from the adjust-able rate Reverse Mortgage or $55,000 in cash from the fixed rate Reverse Mortgage.







And What About Interest on the Fosters’ Reverse Mortgage Loan?Interest accrues on a Reverse Mortgage loan over time. However, rather than being paid monthly, it isnot paid until the Reverse Mortgage is due – which is when you no longer live in your home.

Fixed Rate Interest

With a fixed rate Reverse Mortgage, you must take any loan amount that remains after paying off themortgage and fees in cash.

You therefore accrue interest on the total loan amount starting at the very outset of the loan – usuallyresulting in a larger amount of interest being owed over time.

If the Fosters choose the fixed rate product at a 3 percent interest rate, and then vacate their homein 10 years, then they would have accumulated approximately $40,000 in interest over those years.

They would therefore owe a total of: $155,000 ($115,000 + $40,000) OR the value of the home atthat time – whichever is less.

Adjustable Rate InterestAn adjustable rate Reverse Mortgage enables you the option of taking available money as cash, a lineof credit or as lifetime income payments.

If you take a line of credit or monthly income payments, then you only accrue interest on the money thatis actually used.

If the Fosters choose the adjustable rate option, then the amount of interest they will owe in 10 yearswould depend on a number of factors, including interest rate fluctuations and how much of the$35,000 in available money they used.






Here are a few ways to protect yourself from fraud:

Finding a Licensed and Reputable Reverse Mortgage Lender

NEWRETIREMENT PRESCREENS LENDERS FOR YOU

Again, be sure you are working with a lender who islicensed by The Department of Housing and UrbanDevelopment (HUD) and is a member of the National

Reverse Mortgage Lenders Association (NRMLA). Noother distinction – no matter how official sounding -- isimportant if they lack these two.

Secure Reverse Mortgage offers from multiple lendersand be suspicious of any sizable discrepancy in interestrates, fees, loan payments and total costs.

Be wary of any lender who pressures you to secure a loan.

Lenders are not supposed to encourage you to use your Reverse Mortgage

proceeds to buy annuities, investments, home repair or other services – in some states thispractice is illegal.

For More Information

For more information, please seeNewRetirement’s Reverse Mortgage Section.

You can also call us toll free at 866-441-0246

or visit our Contact Us Page.

NewRetirement is one company who has always scrupulously checked the licensing,business practices and memberships of Reverse Mortgage lenders.

Are licensed by the Department of Housing and Urban Development (HUD)

Adhere to the National Reverse Mortgage Lender Association (NRMLA)guidelines for best practices

Have a clean record with the Better Business Bureau

Are verified as reputable by at least two references

We only refer potential borrowers to brokers who:



http://www.newretirement.com/Contact_Us.aspx



http://www.newretirement.com/Contact_Us.aspx




Key Benefits of a Reverse MortgageA Reverse Mortgage can offer many benefits to a borrower.

The main advantage of Reverse Mortgages is that if you have a financial need they are an extremely flexiblefinancial planning product with very few - if any -restrictions on how you receive and use the money.

With a Reverse Mortgage you:

Stay in Your Own Home: A Reverse Mortgage enablesyou to live in your home for the rest of your life – no matter how long you live -- without having to deal with the financial burden of mortgage payments.

Eliminate All Mortgage Payments: A Reverse Mortgage eliminates all mortgage payments.

Have Options for Accessing Your Equity: If you have sufficient equity, you can choose to receivethe money in a lump sum, as a line of credit, or in a series of monthly payments for as long as youlive in the home. You can even combine the options to fit your precise needs.

Are Insured: Reverse Mortgages are insured by the federal government, which guarantees that youwill continue to receive your money even if the lending institution you set the Reverse Mortgage upwith goes out of business.

Can Use Proceeds in any Way: There are no restrictions on how you use the money from youReverse Mortgage.

Will Not Owe Additional Funds: With a Reverse Mortgage you will never have to payback morethat the home's value at the time the loan is repaid, even if the Reverse Mortgage lenders have paidyou more money than the value of the home at that time.

Have No Income Requirements: Unlike home equity and other types of loans, there are no incomerequirements for a Reverse Mortgage. The only requirements are that all titleholders be 62 or older,that the home be an approved type and that you have sufficient equity.



http://www.newretirement.com/Services/Reverse_Mortgage_Advantages_Disadvantages.aspx








It is important to note that potential borrowers in certain situations are likely to be poor candidates for aReverse Mortgage. Evaluate a Reverse Mortgage particularly carefully if:


Disadvantages of a Reverse MortgageLike any product, a Reverse Mortgage is not without its disadvantages.

Fees: Reverse Mortgage fees are generally higher than those

in a traditional mortgage, due to the required FHA mortgageinsurance premium, which protects the bank from losses shouldthe home sell for less than the Reverse Mortgage is worth.

Fees on a Reverse Mortgage generally average about 5.5%of the maximum loan amount. However, most fees come out of the Reverse Mortgage proceeds.The only out of pocket fees are the mandatory Reverse Mortgage counseling and FHA appraisalcosts, the amounts for which vary based on your location.

Estate Issues: Many potential Reverse Mortgage borrowers are also concerned about reducing the

size of their estate. And it is true, with a Reverse Mortgage you are using money that was stored ashome equity in much the same way you might use money from savings.

However, you can still leave your home to your heirs and they will have the option of keeping thehome and refinancing or paying off the mortgage or selling the home if the home is worth more thanthe amount owed on it.

Special Considerations: You will also want to be careful about a Reverse Mortgage if you arecurrently eligible for Medicaid or other government assistance program or fit other criteria discussedon the next section.

SPECIAL CONSIDERATIONS

You plan to move in the next two years: Sellingthe home in less than two years will generally givethe borrower insufficient proceeds to make theReverse Mortgage worthwhile.

Your spouse is not on the title: If one spouse isnot on the title and the titleholder were to suddenlypass away, the Reverse Mortgage would immedi-

ately come due, and the surviving spouse would beforced to immediately repay the Reverse Mortgage,refinance into a traditional mortgage, or sell thehome.

The proceeds are simply for one large purchase:Because Reverse Mortgage fees can be high, it ismay be advisable to consider more traditionalsources of financing if you only want to use theproceeds for one large purchase (such as a car).

You wish to purchase an annuity product:The money from a Reverse Mortgage can beannuitized -- taken in the form of lifetimemonthly payments. As such, borrowers aregenerally advised against purchasing other annuity products with their Reverse Mortgageproceeds since this can result in duplication of fees and closing costs.

You depend on Medicaid: While it is possibleto take out a Reverse Mortgage without losingyour Medicaid eligibility, the distribution of theproceeds must be closely controlled. Talk toyour loan officer to make sure that a ReverseMortgage will not cause you to lose your eligibility for Medicaid or other needs-basedfinancial assistance you benefit from.










Different Types of Reverse Mortgages and Ways to Get Your Benefit

Variations of the Home Equity Conversion Mortgage (HECM) are the only Reverse Mortgage loanprograms currently widely available. The HECM is a product regulated and insured by the federalgovernment and is offered by approved lenders.

There are currently three HECM Reverse Mortgage products from which borrowers can choose:

HECM LIBOR: The HECM LIBOR is an adjustable rate Reverse Mortgage product, in whichinterest accumulates on the basis of the London InterBank Offering Rate (LIBOR). Funds froma LIBOR are generally paid out in either monthly payments or a line of credit, though you canreceive the money in the form of a lump sum if you wish.

HECM FIXED: The HECM FIXED is a fixed rate Reverse Mortgage product, in which the inter-est accumulates at the fixed rate agreed upon by the borrower and the lender at closing. Fundsfrom a HECM FIXED are generally paid out in a lump sum at closing.

While you will usually receive a larger amount of proceeds from a HECM FIXED program, youcannot choose to take them in the form of a monthly payment or line of credit.

HECM FOR PURCHASE: A HECM FOR PURCHASE is a product that allows the borrower touse a Reverse Mortgage to purchase a home for only the price of the down payment.

The borrower still makes no mortgage payments for as long as they remain in the home. AHECM FOR PURCHASE is a great way for seniors to purchase a new home without the needto qualify for or make the payments on a traditional mortgage. Please contact a loan officer for more information.

WAYS TO ACCESS YOUR REVERSE MORTGAGE MONEY

With the exception of the HECM Fixed, the money from a Reverse Mortgagecan be paid in your choice of three different ways – or a combination of thesemethods:

Cash: You can receive the full amount you are eligible for in one lump sum payment. Monthly Payments: You can annuitize the lump sum payment into a series of monthly payments either for a preset term or for the lifetime of a Reverse Mortgage.Many seniors use this option to supplement their Social Security or other retirementincome.

Line of Credit: You can establish the Reverse Mortgage in the form of a line of credit, allowing you to borrow any amount you wish as needed up to the maximumamount you are eligible for. This enables you to keep the end cost of the loan downby only drawing what you need and leaving the rest of the Reverse Mortgageuntapped.





http://www.wsjprimerate.us/libor/libor_rates_history.htm



http://www.newretirement.com/Services/Reverse_Mortgage_for_Purchase.aspx






http://www.wsjprimerate.us/libor/libor_rates_history.htm








Who is eligible for a Reverse Mortgage?

Anyone who owns an FHA approved home in the United States who is over the age of 62 is eligible for a Reverse Mortgage if they have enough equity in the property to qualify.

I am 65, but my wife is 55. Can we still take out a Reverse Mortgage?

Eligibility for a Reverse Mortgage is determined by the age of the youngest person on the title of thehome. As such, in order for you to take out a Reverse Mortgage, you would need to remove your wifefrom the title of the home, and take out a Reverse Mortgage in your name. This is generallydiscouraged, as if you were to suddenly pass away, the Reverse Mortgage would immediately comedue, even if your wife were still living in the home.

So the bank owns my home, right?

No. At no point in a Reverse Mortgage does the bank or lending institution own the home. Instead, the

bank will hold a lien on the home, just as if you had gotten a traditional mortgage. When the borrower passes away or otherwise terminates the Reverse Mortgage, the heirs or estate generally have a year to sell the home, at which point the proceeds will be used to pay back the Reverse Mortgage.

Do my heirs have to sell the home when the Reverse Mortgage is due?

No. Heirs to a home in a Reverse Mortgage have several options, including paying off the ReverseMortgage in cash, refinancing the Reverse Mortgage into a traditional mortgage, and selling the home.In addition, if the home is sold for more than is owed on the Reverse Mortgage, the proceeds go to theheirs.

The real estate market isn’t doing well. If my home sells for less than the Reverse Mortgage isworth, will the bank go after my heirs?

No. A Reverse Mortgage is a non-recourse lien on the property, not on the borrower. As such, if thehome is sold for less than the Reverse Mortgage is worth, the bank will take the loss. The borrower’sheirs are not responsible.

For more frequently asked questions,please see the NewRetirement Frequently Asked Questions page.

Frequently Asked Questions

Page 1Copyright 2010 www.NewRetirement.com 866.441.0246

http://www.newretirement.com/Services/Reverse_Mortgage_FAQ.aspx








NewRetirement

NewRetirement100 Pine Street, Suite 590San Francisco, CA 94111

Terms of Use

http://www.newretirement.com/Terms_of_Use.aspx

http://www.newretirement.com/Terms_of_Use.aspx

New Retirement Reverse Mortgage Guide

Documents

Transcript of New Retirement Reverse Mortgage Guide