Reverse Mortgage Planning Strategies for Professionals

Realtors - Financial Planners - CPAs- Insurance Agents-Eldercare Attorney

Senior Baby Boomers Are Explosive Segment of Market.

• Every day over 10,000 Baby Boomers will reach the age of 65. That is going to keep happening every day for the next 19 years.

• 35% of Americans at present over the age of 65 rely almost entirely on Social Security payments alone.

• Baby Boomer home ownership is over 70 percent.

The U.S. population 65 and older is now the largest in terms of size and percent of the population,

More than one third of adults, 34%, surveyed in November 2010 said that they had no savings for retirement, and 27% had no personal savings.

How does a reverse mortgage loan differ from a conventional mortgage ?

With a conventional mortgage or home equity loan:• Borrowers qualify based on their income, employment

and credit score. • These loans require the borrower to repay the amount

borrowed by making monthly mortgage payments over a specified term to the loan servicer.

With a reverse mortgage loan: • Borrowers 62 + of age• There are no income, employment or credit score qualifying

restrictionsPrimary residences only

• No monthly mortgage payments are required from homeowner

as long as the conditions of the loan are met

Why Help Clients With Reverse Mortgage?

• Reverse mortgage loan proceeds may be used for any purpose as a tax free proceed :

• Meeting daily or monthly expenses• Covering healthcare , home health care, Life Insurance

premiums ,LTC premiums• Long Term Care of spouse • Remodeling or home repairs and upkeep , paying taxes and

homeowners insurance premium• Consolidating credit card debt• Delaying Social Security Income till FRA - Full Retirement AGE means

more money 5.5% -8% more per year if they wait until age 70-thus increasing the amount of one's ultimate monthly Social Security income.

• Estate Planning – gifting• Eliminate a current conventional mortgage payment expense

Disbursement Options• • Fixed monthly payments• • A line of credit - earns interest until withdrawn• “through a combination of a retirement portfolio and reverse

mortgage equity line withdrawals that the cash flow survival rate was higher than if used as a last resort and provided a higher net worth after a 30 year period”

• • Lump sum - proceeds taken up front as cash

Or a combination of any of these options• Modified Tenure- combination of LOC + monthly payments

as long as they reside in home.• Modified Term - combination of LOC + monthly payments

for specific period of years

HECM Line of CreditLOC Grows at Current rate until withdrawn

HECM SAVER- lower home value solution

HECM Saver Rolled out in October 2010• HECM Saver is a low cost alternative to the HECM

Standard Reverse Mortgage. The HECM Saver significantly reduces the upfront Mortgage Insurance Premium (MIP) therefore reducing the total closing costs.

• The initial MIP premium is 2% on the standard HECM and is dropped to .01% for the HECM Saver

• This can make the HECM Reverse Mortgage a more attractive option for a borrower with a lower home value

• The drawback is that the borrower will be given a lower principal limit from which they can draw out the equity

HECM SAVER- lower home value solution

HECM SAVER- lower home value solution

MIP Reduced

Available Funds Reduced

Retirement Solutions

• How Can We Work together to put these strategies together for seniors:

• Financial Planners• Stretching the retirement income of your clients with the Line

of credit reverse mortgage• Insurance Agents• Utilizing equity line to fund a whole life or universal life

premium or Long Term Care Policy – Home Owners Insurance Premiums

• Realtors• Show a borrower how they can downsize using a reverse

mortgage HECM for Purchase of a new more accommodating home when they might not otherwise qualify

Retirement Solutions

• Case Study #1 • • Ann and Richard Bartow, both age 80, are looking for a way to• pay for immediate healthcare needs and be prepared to cover future• long-term care insurance premiums.• • The Bartows want stay in their home, which they own free and clear.• • The last thing they want to do is start making monthly mortgage payments again• • Their Financial Planner or Insurance agent refer them to Chris Beard a reverse mortgage

consultant.• • Chris shows the Barrows how a reverse mortgage loan could help address their needs and

ease their financial concerns:

• Current home value $400,000• Reverse mortgage proceeds $243,000• The Bartows choose a $55,000 initial lump sum and put the rest of• their proceeds in a reverse mortgage line of credit. This gives them the• flexibility to draw out available funds to manage expenses as they arise.• They are able to stay comfortably in their home and they have financial• options to manage their expenses.

Retirement Solutions• Case Study #2

• Kim Smith is a recently retired school teacher age 65. She loves the• convenience and easy maintenance of her villa near the coast, but is concerned• about meeting her living expenses and increased homeowners insurance

premium on a fixed income.• • Ms. Smith makes monthly mortgage payments of $1,200, and her remaining

mortgage principal balance is $40,000.• • Her retirement income sources are limited to a modest pension and Social

Security.• • Ms. Smith wants to avoid dipping into her personal savings, but thinks things will

be tight.• • Jim her homeowners agent refers her to Chris Beard, a FirstBank reverse

mortgage consultant.• • Chris shows Ms. Smith how a reverse mortgage loan could eliminate her

monthly mortgage payments and give her budget more breathing room and cover housing expenses like homeowners insurance and taxes.

Retirement Solutions• Case Study #3

• Empty nesters Jean and Thomas Parker, both 74,• want to buy a smaller, more manageable single-story home ,they work with real estate agent

Shelley Smith to sell their current two-story home.• • In a separate transaction, the Parkers want to buy a new single-story home priced nearby

senior housing community.• •Realtor Shelly Smith introduces the Parkers to Chris Beard, a FirstBank reverse mortgage

consultant.• • Chris shows the Parkers how a fixed-rate reverse mortgage loan for purchase feature the

additional funds they’ll need:

• New home purchase price $300,000• Reverse mortgage proceeds $200,309• Cash required to close $99,691

• The Parkers combine $99,691 from the sale of their departure home• with the. $200,309 reverse mortgage loan proceeds to buy a new home• for $300,000. They move in, without the required monthly mortgage• payments of a traditional mortgage - and no more stairs to climb!

Purchase Market Opportunities• The current housing conditions make the reverse mortgage for purchase

a great solution for those over 62 looking to transition or relocate. Here are a few reasons that make now the time to consider the reverse purchase:

• Untapped Resource -Real Estate Purchase Reverse is untapped – underutilized loan program- lack of understanding or awareness

• Home Values -Current home values are 33% lower than in 2006 • Inventory – Large volume of homes on the market to choose from• Tightened Credit- qualifying requirements for conventional financing– Reverse does not

underwrite this way• Less disposable income- less income needed with reverse borrowers plus borrowers keep nest

egg and have no future payments• Low Interest Rates- historically low expected at least through part of 2013• Home Equity- of adults older than 65, four in five own their homes outright, without a mortgage• Growing Senior Population- 20% of population over 60 years old -By 2020 expected to reach 76

million in US population• Retirement Planning- Financial planners recommend utilizing your home as a resource to extend

income in combination with SSI & pensions over longer period of life rather than just a last resort resource

Realtor Purchase Market Opportunities

• Realtors help your clients and grow your own business opportunities:

Show buyers how they can buy/ qualify for a higher value home• Show buyers how they can purchase a home with no future mortgage

payments• Help Seniors buy when credit score and income requirements are an

issue for them (Reverse does not underwrite that way )• Educate- A reverse mortgage can be used to pay for: homeowners

insurance, taxes, Life Insurance, LTC, Insurance Premiums and Home Health Care. To allow borrowers to stay in there home and age in place, prevent foreclosure

• Income- A Reverse Refinance Program can fund 2nd Homes, Vacation Homes and Rental Home Purchases and fund Retirement Income for Life.

• Relocate & Remodel -A reverse mortgage can help a senior buy a more accommodating home or fund repairs and renovations to homes for seniors (roofs, pools, elevators, safety ramps, and bathroom safety bars and more

Realtor Purchase Market Opportunities

Conventional Purchase

Sales Price Current home $350,000

Sellers closing cost $28,000

Net from Sale $322,000

New Home Price $250,000

Remaining Assets $72,000HECM Purchase Reverse

Sales Price Current Home: $350,000

Sellers closing cost $28,000

Net from Sale $322,000

New home price $250,000

Reverse Mortgage Proceeds

$154,750

Cash From borrower sale $95,250

Remaining Assets $226,750

Comparison of a 62 year old couple sell there current home and purchase a lower maintenance villa with amenities and places a large portion of assets in reserves with no future mortgage payments

Contact me to learn more:

Contact InformationChris Beard, NMLS# 353274Reverse Mortgage Specialist9822 Montague StreetTampa, FL 33626Cell: 813-857-1254Toll Free: 866-684-7868cbeard@firstbankonline.com www.GoLocalReverseMortgage.com

Borrowers must be age 62 or older. Consult a tax advisor. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. Family members are also strongly encouraged to participate in these informative sessions. Call for more detailed program information. Loan proceeds are not considered income and will not affect Social Security or Medicare benefits. Monthly reverse mortgage advances may affect borrower eligibility for other programs. Consult either a local program office or an attorney to determine how, or if, monthly reverse mortgage payments might affect a specific situation. This information is for real estate and building professionals only and is not intended for consumer distribution.