Reverse Mortgages The Ab Cs
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Reverse Mortgages The Ab Cs

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A Primer to Reverse Mortgages

A Primer to Reverse Mortgages

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Reverse Mortgages The Ab Cs Reverse Mortgages The Ab Cs Presentation Transcript

  • Reverse Mortgages Sara A. Cornwall Wells Fargo Reverse Mortgage Phone: 203-319-5014 or 866-494-1248 ext 5014 1
  • What is a Reverse Mortgage ? Non-recourse loan that enables homeowners age 62 and older to convert home equity into tax free proceeds. Interest accrues but no payments are required until the home is no longer the borrower’s principal residence. There are no income, medical, asset or credit score requirements to qualify. 2
  • Common Uses of Reverse Mortgages Supplement Monthly Income Estate Planning Long-Term Care Insurance and In-Home Care Funding Retirement Home Purchase Charitable and Family Gifts Life Insurance 3
  • Reverse Mortgage Basics 4
  • Eligibility Requirements Youngest borrower must be 62 years of age or older Property must be primary residence Own home free and clear or use loan proceeds to pay off all remaining home debts or liens Agree to attend an informational session with a HUD approved counseling agency prior to loan application. Eligible properties include single family homes, condos, manufactured homes, one-to-four unit owner-occupied apartment buildings 5
  • Maximum Claim Amount No set loan-to-value The maximum loan amount determined by: Age of the youngest homeowner Property value of the home Current interest rate The FHA loan maximum of $625,500 The older the borrower, the lower the interest rate, the higher the home value, the more funds available 6
  • Lending Limits Property value used in the maximum loan amount calculation is equal to the lesser of the appraised value of the property or the maximum FHA mortgage amount ($625,500 through 2009) Closing costs & repairs funded from the loan 7
  • Payment Plan Options Lump Sum Monthly Payments Tenure (equal monthly payments for as long as property is primary residence of at least one borrower) Term (level monthly payments for a fixed period of time) Line of Credit Combination of Options 8
  • When Does the Loan become Due and Payable? All the borrowers have passed away or sold the property Property is no longer principal residence of at least one borrower for a period exceeding 12 months Borrower refuses to maintain property Borrower does not pay taxes and insurance Borrower violates any other covenant of the loan agreement 9
  • Repayment of a Reverse Mortgage Amount due cannot exceed home value Loan must be repaid in one payment Usually the loan balance is paid out of the proceeds from the sale of the home or other means (personal funds, refinance, etc.) Limit for repayment is one year If the balance on the loan exceeds the appraised value at the time of sale, the shortage is made up. 10
  • Dispelling the Myths: The Five Nevers “Never” impacts Social Security, Medicare or pension “Never” have to give up title to their house “Never” owes more than the value of their house “Never” restrict on how funds are received “Never” has to move or make monthly payments 11
  • Consumer Safeguards and Tax Benefits 12
  • Consumer Safeguards Non-Recourse Loan – you never owe more than the value of your property Mandatory Counseling with an FHA-trained outside counseling agency – usually done on the phone Capped Interest Rates Payment Guarantee No Prepayment Penalty Three-Day Right of Rescission Advance Disclosures 13
  • Tax Benefits Payments are not taxable, as they are considered loan payments not income Accrued interest payments generally deductible upon repayment of the loan – check with your advisor Lowers estate tax risk Proceeds do not affect Social Security or Medicare benefits. May affect other entitlement programs – check with the agency 14
  • Reverse mortgages can help make your retirement years golden. golden Teaming up with Wells Fargo Home Mortgage, the nation’s leading originator of reverse mortgages, can preserve and protect your clients’ assets. Sara Cornwall Wells Fargo Reverse Mortgage (203) 319-5014 (866) 494-1248 ext 5014 15