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7 secrets-to-reverse-mortgage

  1. 1. 7 Secrets of Reverse Mortgages © 2012 7 Reverse Secrets. All rights reserved.
  2. 2. 2www.7reversesecrets.com Introduction: What’s Your Story?.............................................................................................................3 What Exactly Are the Requirements?.......................................................................................................4 How Will You Receive the Money?...........................................................................................................5 Recognize Misleading Claims...................................................................................................................6 Secret #1: What Do You Need the Money For?.......................................................................................7 Secret #2: Are Reverse Mortgages A Government Entitlement Program?.........................................8 Secret #3: Rising Debt, Falling Equity-Huh?......................................................................................9 Secret #4: Loan Options-How it Benefits You, Not the Lender............................................................11 Secret #5: Aging In Your Home...............................................................................................................15 Secret #6: Possible Hidden Fees..............................................................................................................17 Secret #7: Negotiating Better Terms.......................................................................................................18 Key Points to Remember..........................................................................................................................21 Examples Used..........................................................................................................................................22 Resources...................................................................................................................................................23 Contents: © 2012 7 Reverse Secrets. All rights reserved.
  3. 3. 3www.7reversesecrets.com Choosing to stay in your own home in your retirement years is always a viable option. The first step is to empower yourself with knowledge and an understanding of what is economically fea- sible. A reverse mortgage might just be exactly what you’re looking for. This book offers a careful analysis of what a reverse mortgage is and whether it is a viable option for either yourself or your parents. It will clarify the myths, discuss the pros and cons, and provide you with important infor- mation in order to evaluate the risk and value factors of a reverse mortgage for you. You will find that some of the information is repeated throughout the book. Experts say that re- peating new information allows us to become more comfortable with the knowledge thereby an- choring it in our minds. This booklet is designed to help you enjoy the exploration of new financial solutions. You will find the material is essential to the success of your future decisions. What the Heck is a HECM? A Home Equity Conversion Mortgage (HECM), or Reverse Mortgage (RM), is a loan for home- owners aged 62 and older. A reverse mortgage uses a portion of the home’s equity as collateral. This type of loan generally does not have to be repaid until the last surviving homeowner perma- nently moves out of the property or passes away. At this time, the estate would have approximately six months to repay the balance of the reverse mortgage or sell the home to pay off the balance. The estate would not be liable if the home sells for less than the balance of the reverse mortgage. To be eligible for a reverse mortgage, the Federal Housing Administration (FHA) requires that you be at least 62. You must own your home free and clear or be able to satisfy all existing liens with the reverse mortgage. If there is a current balance on your mortgage, it may be paid off with the proceeds of the reverse mortgage. The amount that is available generally depends on four factors: age (older is better), current in- terest rate, appraised value of the home, and government-imposed lending limits. Sounds simple enough, right? Now, let’s look at the details. What’s Your Story? © 2012 7 Reverse Secrets. All rights reserved.
  4. 4. 4www.7reversesecrets.com Truth be told, necessary conditions can be, well… boring. However, it is important that you un- derstand the details and make notes. You want to get as much information up front before you move forward with a reverse mortgage. As repetitive or tiresome as it may sound, you want to keep all of your questions, notes, and paperwork well organized. It will only help you when making your final decision. Borrower Requirements: You must: • Be 62 years of age or older. • Own the property outright or pay off the existing mortgage at closing. • Any other existing mortgages, including home equity loans and Home Equity Line of Credits (HELOC), must be paid off at or before the closing. • Occupy the property as your principal residence. • Not be delinquent on any federal debt. • Complete a counseling session with an objective third party counselor. Property Requirements: The following eligible property types must meet all FHA property standards and flood require- ments: • Single-family home or two-to-four-unit home with one unit occupied by the borrower. • Housing and Urban Development (HUD) approved condominium project. • Manufactured home that meets FHA requirements. • You must keep your home in good repair. Financial Requirements: • Income, assets, monthly living expenses, and credit history may be verified by the lender. • Timely payment of real estate taxes, hazard and flood insurance premiums may be verified. 1. This is especially important to remember! With a traditional mortgage, if you don’t pay your taxes and insurance, you are at risk of losing your home. The same goes for a reverse mortgage. An alarming number of RM borrowers are at risk of foreclosure due to nonpay- ment of taxes and insurance. 2. Always remember that an RM does NOT make you exempt from paying taxes or insur- ance. What Exactly Are the Requirements? © 2012 7 Reverse Secrets. All rights reserved.
  5. 5. 5www.7reversesecrets.com You can select from five payment plans: • Tenure: Equal monthly payments as long as at least one borrower lives and continues to oc- cupy the property as a principal residence. • Term: Equal monthly payments for a fixed period of months. • Line of Credit: Unscheduled payments or in installments (at times and in an amount of your choosing) until the line of credit is exhausted. • Modified Tenure: Combination of line of credit and scheduled monthly payments for as long as you remain in the home. • Modified Term: Combination of line of credit plus monthly payments for a fixed period of months selected by the borrower. • Lump Sum: Receive all the money at closing. You can change your payment plan option for a small fee, usually around twenty dollars. We will explore this further later on. Mortgage Amount Based On: The amount you may borrow will depend on: • Age of the youngest borrower; • Current interest rate; • Lesser of the appraised value or the reverse mortgage FHA mortgage limit of $625,500; and • Initial mortgage insurance premium. How Will You Receive the Money? © 2012 7 Reverse Secrets. All rights reserved.
  6. 6. 6www.7reversesecrets.com • As a Borrower, You Never Have to Pay Back the Loan “During Your Lifetime” A mortgage becomes due when 1) a homeowner decides to sell his or her home; 2) all home- owners have moved out of the property for 12 consecutive months (this includes a stay in skilled care/rehab); or 3) the homeowner passes away. Usually a reverse mortgage is repaid by selling the home. If the money from the sale of the home isn’t enough to repay the reverse mortgage, the lend- ers absorb the difference through the FHA mortgage insurance premiums that the homeowner has paid on the loan. This is one of the reasons why reverse mortgages may seem more expensive than other options. Mortgage insurance allows lenders to offer this as a “non-recourse” loan. This means that you (the borrower or your estate) will never repay more than the loan balance or the current market value of the property, whichever is less, and no assets other than the home may be used to repay the debt. More simply, if you or your estate do not pay the balance when due, the remedy is limited to foreclosure and you will not be personally liable for any deficiency resulting from the foreclosure. • “You Can Never Lose Your Home” Another potentially misleading claim. Until your loan is due, you will not make monthly pay- ments to the lender. However, you will make payments for your real estate taxes, homeowners insurance, and property dues related to your real estate. It is important that you maintain these payments so that the reverse mortgage lender does not call your loan due and payable. If you do not pay taxes and insurance, you could be at risk of foreclosure. False or misleading information poses a risk to consumers. If you do not understand a feature, risk, or obligation of a reverse mortgage, be sure to review the product until you do. Have your counselor and lender help you make sense of statements and collected materials you may be un- sure of. You want to choose the best mortgage features to suit your needs. Recognize Misleading Claims © 2012 7 Reverse Secrets. All rights reserved.
  7. 7. 7www.7reversesecrets.com You want to make the most of your retirement years, and you have worked hard all your life. If you are like millions of other Americans, you have invested blood, sweat, and tears into your home. A reverse mortgage is a way for your home to start paying you back. You may find that you need more financial flexibility, security, and predictability. By taking ad- vantage of a reverse mortgage, you may be able to achieve this and more. Many homeowners use a RM to supplement their retirement, accessing their home equity and converting it into tax-free retirement income. But before you move forward with a reverse mortgage, you have to ask your- self what you need the money for in order to determine if it is the best solution for you. We’ll let you in on a secret. There are no restrictions on how you can use the money from a re- verse mortgage. However, if your home is in need of FHA-required repairs or you have an exist- ing lien, judgment, or tax payment due, those obligations must be paid either through the reverse mortgage loan or prior to obtaining the loan. If it is right for you, a reverse mortgage could provide you with the ability to enjoy financial security while remaining in your own home during your retirement years. So, what do you need the money for? • Supplement your retirement income. • Eliminate debt. • Pay for medical care, prescription drugs, and in-home care. • Cover large or unexpected expenses. • Make home improvements. • Modify your home for better accessibility. • Travel to visit family and friends or take vacations. • Contribute to your grandchildren’s college education. • Buy a new car you need or want. • Purchase gifts for children or grandchildren. • Live a more comfortable lifestyle. • You want to give something to your children and see how they use it. Be sure to make a list of what you need the money for, so you can determine if a reverse mortgage would meet your specific needs. In discussing your options with your family, you may decide that a reverse mortgage is not right for you. Take the list with you when meeting with a counselor, so that he or she can help you determine what the best product will be for your situation. Secret #1: What Do You Need the Money For? © 2012 7 Reverse Secrets. All rights reserved.
  8. 8. 8www.7reversesecrets.com Reverse mortgages are a complex product to understand. With countless advertisements and an overwhelming number of websites to sift through, there is potentially misleading information out there that needs clarification. You may have come across information stating that reverse mortgages are a “government benefit” or an “entitlement.” While it is true that a reverse mortgage is a government-insured loan, it is not a government benefit program. Benefit programs are programs like Medicare or Social Security, which are programs that you are entitled to once you meet their qualifications. Simply put, a reverse mortgage is a loan against your primary residence that must be repaid. You are not required to make monthly mortgage payments; instead the repayment of the loan happens when you or your heirs sell (or refinance) the property. This usually occurs after the last surviving borrower passes away, and the heirs decide to keep or sell the property. Reverse mortgages are a special type of loan that allows you to access the equity you have built up in your home now, and defer payment of the loan until you pass away or sell or move out of the home. Reverse mortgages enable you to use your home equity to enjoy a more comfortable retire- ment without having to sell your home. Here’s the secret: There is information out there on programs that may be available to you. Check out www.n4a.org (National Association of Area Agencies on Aging). This excellent website is a great resource, with information on money, housing, health, consumer protection, and more. Don’t have a computer? That’s okay! Just call 202-872-0888. Keep in mind that there are federal and state assistance programs that you may become ineligible for if you deposit too much money from a reverse mortgage into a bank account. Just be aware of any programs you currently use or may use in the future for assistance, and review these during your counseling session. Secret #2: Are Reverse Mortgages a Government Entitlement Program? © 2012 7 Reverse Secrets. All rights reserved.
  9. 9. 9www.7reversesecrets.com A reverse mortgage is considered to be a rising balance and falling equity loan. Let’s walk through this and see if we can clarify this puzzling subject. Perhaps the best way to explain it is to compare it with that something you are familiar with; that is, falling debt, rising equity. With a traditional mortgage (or forward mortgage), you typically make a down payment to purchase your home and borrow the rest of the money you need to buy it. You then make monthly mortgage payments (which include principal and interest) over a num- ber of years. In this scenario, your debt decreases and your home equity increases. Every time you make a payment on your traditional loan, the loan balance grows smaller, and your equity (or ownership value) grows bigger. If after twenty-five to thirty years you owe nothing, your home equity will be equal to the value of your home. This is a perfect example of falling debt, rising equity. With a reverse mortgage, because you are taking the equity out in cash, your debt increases and your equity decreases. Unlike a traditional mortgage, the reverse mortgage lender sends you cash during a reverse mortgage, and you make no monthly repayments. The more cash you get, the larger your debt gets, and then more interest is added to the balance. In this scenario, your debt grows and your equity declines. Because there are no required monthly payments, the interest is added to the loan balance each month. This results in a rising loan balance that can eventually grow to exceed the value of the home. However, you (or your estate) are not required to repay any additional loan balance that is in excess of the value of the home, and you may remain in the home indefinitely as long as you continue to meet the requirements. Secret #3: Understanding Rising Debt, Falling Equity—Huh? © 2012 7 Reverse Secrets. All rights reserved.
  10. 10. 10www.7reversesecrets.com If you decide to move or sell your home and the reverse mortgage becomes due, you may owe a lot of money and the equity in your home may be very little. If you have a reverse mortgage for a long period of time, or there is a significant decline in home values, you may end up with no equity left at the end of the loan. Don’t worry! As an informed borrower, this is exactly what you want—to spend down the equity in your home while you live there without having to make loan repayments. This is what is known as rising debt, falling equity. Secret #3: Continued © 2012 7 Reverse Secrets. All rights reserved.
  11. 11. 11www.7reversesecrets.com Reverse mortgage borrowers have an array of choices as to what kind of loan they would like. As a borrower, you have options for structuring the mortgage insurance premiums (MIP), the interest rate type, and the way that you receive your loan money. And, as you may guess, as the options increase, so does the confusion. You choose: • Mortgage insurance premiums: There are two basic options available, the standard or the saver. 1. The standard MIP is the most expensive option. This is calculated at 2% of the home’s appraised value (or max claim amount). For example, if your home is appraised at $150,000, then the up-front MIP cost is $3,000 (those fees will most likely be built into your loan). With this option, if you are 65 years old and interest rates are 5.05%, you will qualify for a principal limit of $95,500. 2. The saver MIP is the least expensive option. This is calculated at .01% of the home’s app- raised value (or max claim amount). For example, if your home is appraised at $150,000, then the upfront MIP cost is $15. With this option, if you are 65 years old and interest rates are 5.06%, you will qualify for a principal limit of $79,800. • Interest rate: You may choose between an adjustable or fixed rate option. ▶ Fixed rate option: 1. Fixed rate reverse mortgages are only available with a lump-sum payout. This means that you need to take all the cash you qualify for at closing. 2. Fixed rate reverse mortgages are structured as closed-end loans, meaning you may NOT borrow additional funds at a later date. 3. Typically they carry a higher interest rate at origination, but they will not adjust as the market changes. Secret #4: Loan Options—How They Benefit You, Not the Lender © 2012 7 Reverse Secrets. All rights reserved.
  12. 12. 12www.7reversesecrets.com ▶ Adjustable rate option: 1. Adjustable rate reverse mortgages allow you to choose from the following payments op- tions: Line of credit, monthly payments, tenure payment, lump sum, or a combination of these. 2. Adjustable rate reverse mortgages are structured to be open-ended loans, meaning you can pay off part of the loan to free up that part of the credit line for later use. 3. Interest rate is not fixed, and will adjust according to the note that you execute (most likely a monthly adjustable rate). 4. Credit line growth feature: If the loan is not fully drawn on, any unused portion of the credit line is compounded at the same rate as the loan balance, and you can take advan- tage of that expanding credit line at a later date. • Payment of loan proceeds to you: As previously mentioned, you have a variety of loan dis- bursement options. Let’s review them. 1. Tenure: Equal monthly payments for as long as you live in your home. 2. Term: Equal monthly payments for a fixed number of years. 3. Line of Credit: A line of credit accessible at your discretion. 4. Modified Tenure: Combination of smaller fixed monthly home. 5. Modified Term: Combination of smaller fixed monthly payments for a fixed number of years, with a line of credit accessible at your discretion. 6. Lump Sum: Receive all the money at closing. Secret #4: Continued © 2012 7 Reverse Secrets. All rights reserved.
  13. 13. 13www.7reversesecrets.com The secret is that having loan options actually benefits you, not the lender. Let’s take a look into the future utilizing an amortization table and compare the fixed rate option with the adjustable rate option using the following example (assuming your home appreciates). To help simplify this information, let’s use the following for our example: a home with a value of $150,000, a 65 year-old youngest borrower, and a current loan balance of $50,000. This loan com- parison can be found at the end of this book. • Current home value: $150,000 (future value based on a 4% home appreciation) • Current mortgage to pay off: $50,000 • Age: 65 • After paying off the $50,000 mortgage, if you have chosen a fixed rate at 5.05%, you will receive a lump sum of $36,800. • After paying off the $50,000 mortgage, if you have chosen an adjustable rate at 2.714%, you will receive a line of credit of $36,800. FIXED RATE: In five years In ten years In twenty years You will have: $0 available You will have: $0 available You will have: $0 available Your loan balance will be: $130,000 Your loan balance will be: $179,000 Your loan balance will be: $335,000 Your home value will be: $182,000 Your home value will be: $222,000 Your home value will be: $328,000 The amount that can be borrowed with a reverse mortgage is determined by an FHA formula that considers age, the current interest rate, and the appraised value of the home. The more valuable the home (to a certain point), the higher the loan amount will be, depending on lending limits. Secret #4: Continued © 2012 7 Reverse Secrets. All rights reserved.
  14. 14. 14www.7reversesecrets.com ADJUSTABLE RATE: (Estimates of $ available assume you do not borrow on your line of credit for maximum growth) In five years In ten years In ten years You will have: $44,000 available You will have: $54,000 available You will have: $81,000 available Your loan balance will be: $71,000 Your loan balance will be: $87,000 Your loan balance will be: $129,000 Your loan balance will be: $129,000 Your home value will be: $222,000 Your home value will be: $328,000 Remember, with an adjustable rate, if the loan is not fully drawn on, any unused portion of the credit line is compounded at a similar rate as the loan balance. This means that you will have ac- cess to more money in your line of credit in the future. This is a benefit to you. With a reverse mortgage line of credit, your unused funds grow, creating a larger amount for you to use. With the fixed rate option, you only get what you started with. You will not have any access to reverse mortgage funds once you use up your line of credit. Also, keep in mind that there are rate caps in place on an adjustable rate mortgage to keep you from paying high rates in the future. You should ask your lender what the caps are for their pro- gram. Some lenders may have different rate caps. With an adjustable rate you have payment options that can help you tailor the loan to your needs. Whether you need a backup fund, a monthly income, a line of credit, or a combination of monthly payments and a line of credit, understanding your options is to your advantage. Secret #4: Continued © 2012 7 Reverse Secrets. All rights reserved.
  15. 15. 15www.7reversesecrets.com Let’s face it, one of the reasons you are reading this book is to become a savvy consumer in order to make the best choices for you or your loved one. Statistically speaking, most people would prefer to “age in place,” and their overall well-being tends to be better when they remain in the home. One reason you may be exploring a reverse mortgage is that you too would like to remain in your home for as long as possible. Of course, during your discussions the “what ifs” regarding possible physical or health concerns might make you hesitate in your decision making. Explor- ing all aspects of the reality of aging in your home now will help you to stay in better control of your life later. You might not know there are limitless resources out there to not only assist you in aging in your home, but also to ensure that you are tapping into the benefits that will help you remain healthy and improve your quality of life for which you may be eligible . Let’s begin with www.BenefitsCheckUp.org. This is a free service of the National Council on Aging (NCOA), which is a nonprofit service and advocacy organization. BenefitsCheckUp helps you tap into over 2000 federal, state, and private benefit programs to help pay for medications, food, transportation, in-home service, employment training, etc. Many people don’t know these programs exist or how they can apply. BenefitsCheckUp will ask you a series of questions to help identify benefits that could save you money and cover the costs of everyday expenses, and many of the programs you can apply for online. Who knew there are resources out there to help you remain happy and healthy in your home?! You can also call 202-479-1200 for more information. Some other reliable sites to explore are listed below. These sites support programs that can help you remain as healthy and independent as possible in your home and community. • http://www.aoa.gov/ (Administration on Aging) • http://www.nia.nih.gov/ (National Institute on Aging) • http://www.vba.va.gov/VBA/ (Veterans Benefits Administration) Check out these websites for understanding work, volunteering and retirement: Secret #5: Aging In Your Home © 2012 7 Reverse Secrets. All rights reserved.
  16. 16. 16www.7reversesecrets.com • http://www.aarp.org/work/working-after-retirement/ • http://www.ncba-aged.org/default.asp?contentID=37 • http://www.serve.gov/ Be sure to take advantage of your local centers and community. There are many organizations right next door that are willing to help you to age in place. Community centers and organizations like the YMCA have programs that will help you to stay active both physically and mentally. All those “what ifs” don’t seem so burdensome once you discover what kind of support is out there and where to turn when and if something does happen. Again, understanding and getting all of the services and benefits you can now will help you to stay in better control of your retirement later. Secret #5: Continued © 2012 7 Reverse Secrets. All rights reserved.
  17. 17. 17www.7reversesecrets.com Though the costs of obtaining a reverse mortgage may be high relative to other home loans, they’re rolled into the total amount of the loan and amortized over time, so the up-front costs of reverse mortgages are actually relatively low. With an HECM loan, the closing costs are tightly regulated. The secret is to have an idea of what you can expect: • An origination fee, which covers the lender’s operating expenses and is capped at 2% of the appraised home value or the maximum claim limit, whichever is less. Tip: ask for this to be waived since you are shopping around with other lenders. • The mortgage insurance premium, which ensures that the government will step in and con- tinue the loan if your lender goes out of business. • An appraisal fee, which typically ranges from $400 to $500. • A counseling fee charged by the HUD-approved HECM counselor that you meet/speak with, which typically ranges from $90 to $150. • Other legitimate closing costs include the credit report fee, flood certification fee, closing fee, pest inspection, and title insurance, among other fees. With a reverse mortgage, you will retain the title to your home and continue to be responsible for paying the property taxes and insurance and for maintaining the property. Check with your reverse mortgage lender to see whether it will transfer the loan to a loan servicing company, and whether you could eventually end up paying more in service fees if that happens. The loan servicer, whether it’s the original lender or a loan servicing company, can set aside money from the loan proceeds to cover the projected costs of servicing your account. This amount is de- termined by the monthly service fee, which typically ranges from $25 to $35. Like any loan, reverse mortgage contracts can be perplexing and may include hidden costs, so be sure to take your time. Check out negotiating better terms in the next section, for a better way to shop for the lowest fees. As previously stated, there are federal and state benefit programs that could be affected by obtain- ing a reverse mortgage. Because Medicaid is based on income levels, Medicaid recipients need to make sure that the additional income they receive from the reverse mortgage doesn’t disqualify them from those government benefits. Secret #6: Possible Hidden Fees © 2012 7 Reverse Secrets. All rights reserved.
  18. 18. 18www.7reversesecrets.com A major goal for all of us is to keep our hard-earned dollars in our pockets for as long as possible. The secret to maximizing your cash flow is to shop smart in order to receive the best terms possible on your loan. • Shop the market: Working with multiple lenders ensures that you will get the best deal. Be sure to get at least three different lender quotes. Be sure to make it known to the lender that you are shopping around for the best program to fit your needs. • Compare apples to apples: be sure to get loan comparison, total annual loan costs (TALC), and amortization tables in writing. Ask lenders to show you origination fees, service costs, and the reverse mortgage interest rate. Here’s the secret: Focus on today. Since none of us know what will happen tomorrow or in the future, look at what is the best deal for you today. Here’s how to do it. 1. Look at the TALC and compare your quotes from three different lenders. This is where you will be able to see who is actually giving you the best deal. 2. The lower the interest rate , the better the deal. Here is where to look, and what to look for: com- pare the interest rates on the TALC for 2 Year Loan Term and 0% Appreciation Rate. Look at the box in the middle of the document. See below for an example. Secret #7: Negotiating Better Terms © 2012 7 Reverse Secrets. All rights reserved.
  19. 19. 19www.7reversesecrets.com • Do your homework; ask your lender which costs can be reduced. Be your own advocate and ask the lender to cut the costs of origination, closing, or monthly service fees for the loan. Al- ways ask how or if the interest rate can be lowered. • Once you have compared quotes and have looked at the two-year term, pick the product that is right for you (adjustable or fixed rate). • A helpful tip: before you fill out the reverse mortgage application with the lender who offers you the best loan terms and options, you will want to consult with someone who is equipped to answer questions and help make further sense of the information you collected. Secret #7: Continued © 2012 7 Reverse Secrets. All rights reserved.
  20. 20. 20www.7reversesecrets.com By now you understand that there are benefits and risks when considering a reverse mortgage. Ev- ery situation is different, so you have to weigh your risk-to-reward ratio. There is a copious supply of false or misleading advertising out there, so it is important for you to educate yourself and filter through the fact versus fiction. You will need to find yourself an approved HECM counselor near you: • https://entp.hud.gov/idapp/html/hecm_agency_look.cfm Be sure to take your lists, notes, and worksheet with you so that you can discuss all of your finan- cial options. You may find that a different product, a different living arrangement, or other social services may be available for you to meet your specific needs. Be proactive; make sure your counselor explains the following to you: • Have the counselor explain financial risks and benefits of a reverse mortgage to you and then explain them to you again. • Discuss how a reverse mortgage may affect your eligibility for assistance, such as Medicaid or other need-based government assistance. • Be sure to discuss estate planning with your counselor if you have a contract or agreement with an estate-planning service. Take the counseling session seriously. Learn as much as you can about the product, even if it seems repetitive to you. You don’t want to rush into a decision merely because you see dollar signs com- ing your way. Reverse mortgages are a great product, but may not be right for everyone. The right product to meet your needs is out there. You just have to do your research, ask questions, and discuss options with your loved ones. Secret #7: Continued © 2012 7 Reverse Secrets. All rights reserved.
  21. 21. 21www.7reversesecrets.com You do not make monthly payments with a reverse mortgage. • You are still responsible for real estate taxes, insurance, and maintenance of the home. • The loan becomes due when the homeowner sells the home, all homeowners have moved out of the property for twelve consecutive months, or the homeowner passes away. • In order to keep the home when the loan becomes due, you or your estate must repay the re- verse mortgage, up to 98% of the current market value. • You have loan options. • Reverse mortgage costs may vary among creditors and loan types. You may have less expensive options available to you. • You must weigh out the risks and values in consideration with your health. • Read the fine print so that you understand the costs. • A reverse mortgage may affect your eligibility for some government programs, including SSI and Medicaid. • Ask your HECM counselors many questions; this is a program to benefit you. Congratulations… you made it! You are now a more informed shopper. Hopefully, you have had your questions answered clearly. You now know: • What the heck a HECM is. • The questions to ask yourself when considering a reverse mortgage, and what needs to be dis- cussed, revisited, and discussed again. • The typical costs associated with obtaining a reverse mortgage. • You have a basic understanding of reverse mortgages, what the options are, and the pros and cons. If you ask yourself all of the recommended questions in this book, discuss your options, and meet with a counselor, you should now be able to make an independent, informed decision on whether or not the reverse mortgage product will meet your needs. Some Key Points to Remember: © 2012 7 Reverse Secrets. All rights reserved.
  22. 22. 22www.7reversesecrets.com Examples Used: © 2012 7 Reverse Secrets. All rights reserved.
  23. 23. 23www.7reversesecrets.com Consumer Financial Protection Bureau. (June 28, 2012). “Reverse Mortgages: Report to Congress.” Green Path Debt Solutions. (2011). “Rising Debt, Falling Equity.” Retrieved on September 15, 2012 from: http://www.greenpath.com/university/housing/reverse-mortgages Jack Gutentag. (October 22, 2012). “What’s Right with Reverse Mortgages.” Retrieved on October 31, 2012 from: http://knowledgetoday.wharton.upenn.edu/2012/10/whats-right-with-reverse-mortgages/ Juniata Ford, eHow Contributor. (Date unknown) “How to Negotiate Mortgage Terms.” Retrieved on October 13, 2012 from: http://www.ehow.com/how_6576474_negotiate-mortgage-terms.html Jonra Springs, eHow Contributor. (Date unknown) “How to Negotiate Reverse Mortgages.” Re- trieved on October 24, 2012 from: http://www.ehow.com/how_7921983_negotiate-reverse- mortgages.html National Reverse Mortgage Lenders Association. (Date unknown). “What Is a Reverse Mortgage?” Retrieved on September 30, 2012 from: http://www.reversemortgage.org/About.aspx Randalynn Kaye. (2007). “Senior Housing 101.” Stephanie Miles. “A Buyer’s Guide To Reverse Mortgages.” Retrieved on September 17, 2012 from: http://www.caring.com/buying_guides/reverse-mortgage-buyers-guide Resources: © 2012 7 Reverse Secrets. All rights reserved.