Reverse Mortgages

Adam Nimmer

Anders Erickson

Russ Sperry

Phoebe Fields Help! I need MONEY

reverse mortgage a non-recourse loan against home equity providing cash

advances to a borrower and requiring no repayment until a future time

Phoebe Fields How doesit work?

Reverse Mortgage vs. “Forward” Mortgage

Falling Debt, Rising Equity your debt decreased; and your home equity increased.

Rising Debt, Falling Equity your debt increases; and your home equity decreases.

Two Important Notes

Exception to Falling Equity

Your home value grows at a higher rate.

Maximum Debt

You can never owe more than what your home is worth at the time the loan is repaid.

Phoebe FieldsAm I eligible?

Who’s Eligible

Individual at least 62 year of Age The home must be the principal residence Single family residence Some 2-4 unit owner-occupied Some condos, PUD, and manufactured

homes Mobile homes and co-ops not eligible

Phoebe Fields What’s in it for me?

Lump Sum or Credit Line    Lump Sum or Creditline When Expected Interest Rate is

Home Value Age 7% 8% 9%

$100,000 65 $38,423 $30,455 $23,920

70 $44,383 $36,771 $30,040

75 $50,815 $43,948 $37,739

80 $57,653 $51,619 $46,056

85 $64,544 $59,532 $54,704

90 $71,257 $67,263 $63,363

Home Value Age 7% 8% 9%

$150,000 65 $60,873 $48,705 $38,720

70 $69,733 $58,121 $48,404

75 $79,265 $68,798 $59,339

80 $89,353 $80,169 $71,706

85 $99,444 $91,832 $84,504

90 $109,157 $103,113 $97,213

Home Value Age 7% 8% 9%

$200,000 65 $83,323 $66,955 $53,520

70 $95,083 $79,471 $66,404

75 $107,715 $93,648 $80,939

80 $121,053 $108,719 $97,356

85 $134,344 $124,132 $114,304

90 $147,057 $138,963 $131,063

Loan Calculator

Calculator:

http://www.rmaarp.com/

Limits:

https://entp.hud.gov/idapp/html/hicostlook.cfm

Phoebe Fields Where can I get a reverse mortgage?

3 Major Types

Single-purpose

Federally insured

Proprietary

Single-Purpose

  Single-Purpose Federally Insured Proprietary

Can be used for propety taxes, home repairs any purpose any purpose

Availability varies throughout the U.S. varies

Income Elibility most limited to low income no income limit no income limit

Loan-advance types tied to permitted uses all types generally most types

Loan-advance amounts generally the smallest generally the largest largest on highest-value homes only

Cost is generally low moderate high

Offered by state & local government bank & mortgage companies banks & mortgage companies

Backed by state & local government federal government (FHA) private companies

Federally Insured

  Single-Purpose Federally Insured Proprietary

Can be used for propety taxes, home repairs any purpose any purpose

Availability varies throughout the U.S. varies

Income Elibility most limited to low income no income limit no income limit

Loan-advance types tied to permitted uses all types generally most types

Loan-advance amounts generally the smallest generally the largest largest on highest-value homes only

Cost is generally low moderate high

Offered by state & local government bank & mortgage companies banks & mortgage companies

Backed by state & local government federal government (FHA) private companies

Lump Sum: HECM vs. Proprietary  HECM Proprietary

Total Cash to Consumer 86% 71%

Total Loan Costs 14% 29%

Future Net Home Value 100% 100%

Monthly Advances: HECM vs. Proprietary

  HECM Proprietary

Total Cash to Consumer 86% 82%

Total Loan Costs 14% 18%

Future Net Home Value 100% 100%

Proprietary

  Single-Purpose Federally Insured Proprietary

Can be used for propety taxes, home repairs any purpose any purpose

Availability varies throughout the U.S. varies

Income Elibility most limited to low income no income limit no income limit

Loan-advance types tied to permitted uses all types generally most types

Loan-advance amounts generally the smallest generally the largest largest on highest-value homes only

Cost is generally low moderate high

Offered by state & local government bank & mortgage companies banks & mortgage companies

Backed by state & local government federal government (FHA) private companies

3 Forms of Payments Received

Lump Sum

Credit Line

Annuity

Phoebe Fields What’s the catch sonny?

What do you pay?

Application Fee - $300 appraisal, $60 credit check

Origination Fee – limit of 2%

Closing Costs - $2,000

Servicing Fee - $30 monthly

Interest Rates

Monthly and Annually Adjustable Interest

  Monthly Adjustable Annually Adjustable

Expected rate 7.00% 7.60%

Rate cap(s) 10% total 2% per year; 5% total

Servicing fee $35/month $30/month

Lump Sum or Creditline $78,584 $72,570

Monthly Advance $577 $561

Repayment

All reverse mortgages become due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home.

Fail to pay your property taxes Fail to maintain and repair your home Fail to keep your home insured Declaration of bankruptcy

Summary

reverse mortgage a non-recourse loan against home equity

providing cash advances to a borrower and requiring no repayment until a future time

3 Types 3 Forms of Payments Repayment Eligibility Recommendations

Phoebe Fields Now I’m happy.

Vegas, here I come!