Securing Retirement with
Home Equity Conversion Mortgages
Agenda
HECM Basics
Borrower Protections
Fees/Costs
Product Misconceptions

Loan Amounts
Accessing Funds
Retirement Strateg...
Retirement Planning Using Home Equity
Home Equity: The 4th component

Using home equity can help
supplement retirement inc...
HECM Basics

San Diego Mortgage and Loans 760-500-1098

4
What is a HECM?
A Home Equity Conversion Mortgage, HECM, is a loan that an
individual can take using the equity that they ...
Eligibility
• Youngest borrower must be at least 62+ years of age
• Homeowner must live in home as primary residence (6 mo...
Additional Conditions
• Borrower(s) must complete a HUD
approved 3rd party counseling session

• Property must be maintain...
Borrower Protections
Non-recourse loan
3rd party counseling
Lien-holder not added to title

Property satisfies lien
Anti-s...
Program Protections – Repayment Events
No payments are required until a repayment event occurs.
Repayment events regulated...
Loan Fees
Reverse mortgages have many of the same fee types as a traditional
forward mortgage:
Loan Origination
Fee

Calcu...
Reverse Mortgage Specific Fees
There are two types of reverse mortgage specific fees, counseling
and mortgage insurance pr...
Program Misconceptions
Myth # 1: The lender owns the home
Reality: Borrower retains title to home, no one is added

Myth #...
HECM Loan Amounts – Net Proceeds

Equity Available (Principal Limit)

Example: $500,000 Home Value
At Age 62, 72 & 82
$320...
Accessing Funds
San Diego Mortgage and Loans 760-500-1098

14
Disbursement Options - Fixed
Fixed Rate Loan:

With a fixed rate HECM, all proceeds
available in the first 12 months are
d...
Disbursement Options - ARM
Lump Sum:

Draw some of the available cash at closing*

Credit Line:

Access money when they ne...
LIBOR Disbursement – Line of Credit
$800,000

Example: $500,000 Home Value
62 Year Old Borrower
$760,298

Available Line o...
LIBOR Disbursement – Tenure Payments
Example: $500,000 Home Value
62 Year Old Borrower
$600,000

Total Payments Received

...
HECM Strategies for Retirement
San Diego Mortgage and Loans 760-500-1098

19
Hedge Against Home Declines
Impact on HECM LOC in declining housing market
$600,000
$530,604
$500,000
$500,000
$424,483
$4...
Case Study - Deferring Social Security
Client Facts:

Solution:

21

62 year-old clients need to retire due to health
issu...
Claiming Social Security
Monthly Social Security Payments

Monthly Disbursements By Age
$3,500
$3,447

$3,000
$2,500
$2,43...
Monthly Reverse Mortgage Payments

Deferring Social Security
HECM Options

$3,500

$3,338

$3,000
$2,500
$2,000
$2,016

$1...
HECM Strategies: Deferring Social Security
Probability of successfully deferring SS

Source: MoneyGuide Pro Illustration J...
Case Study – Stretching Retirement Account
Client Facts:

Assumptions:

Need $40k (plus SS) in first year, 3% annual
cost ...
HECM Solution – Stretching Retirement Account
No HECM

With HECM

$2,000,000
$1,800,000

Account Balance

$1,600,000
$1,40...
Case Study – Allow Retirement Account Rebound
Client Facts:

Assumptions:

Need $40k (plus SS) in first year, 3% annual
co...
HECM Solution – Retirement Account Rebound
$1,400,000

40.00%
34.11%
31.01%

Account Balance

21.27%
16.81%

17.62%

13.62...
Case Study – Defer Drawdown Until RMD
Client Facts:

Assumptions:

Need $40k (plus SS) in first year, 3% annual
cost of li...
HECM Solution – Defer Drawdown Until RMD
No HECM

With HECM

Account Balance

$3,000,000

$2,500,000

$2,000,000

$1,500,0...
RIGHT-SIZING THE HOUSE

For business and professional use only. Not for consumer distribution.

31
Right-Sizing the Home Example
Client Facts:

70 years-old
$500,000 current home
$0 existing mortgage
$350,000 new home
Doe...
Right-Sizing the Home Example – No HECM
Sales price existing home:

$500,000

Selling costs (commission, fees etc.):

$40,...
Right-Sizing the Home Example – HECM
Net proceeds from home sale:

$460,000

New home price:

$350,000

HECM for Purchase ...
Summary
Transaction similar to
home refinance
It’s Flexible
• Fixed or adjustable rate
• Proceeds may be accessed in
multi...
Thank you for your time.
San Diego Mortgage and Loans 760-500-1098

San Diego Mortgage and Loans 760-500-1098
APPENDIX

37
San Diego Mortgage and Loans 760-500-1098
S&P 500 Annual Returns
S&P 500 Annual Return
40.00%
34.11%
30.00%
26.38%
21.27%

Annual Return

20.00%
16.81%

17.62%

-10...
Glossary of Terms
• Adjustable Rate HECM (ARM)

– A HECM which has an interest rate that is
subject to change, usually on ...
Glossary of Terms (continued)
• Line of Credit (LOC) – A HECM disbursement option whereby the borrower
receives the loan p...
Glossary of Terms (continued)
• Servicing – The maintenance of the loan after it is originated. It includes services
such ...
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Securing Retirement with a Reverse Mortgage:San Diego Mortgage and Loans

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Securing Retirement with a Reverse Mortgage

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Securing Retirement with a Reverse Mortgage:San Diego Mortgage and Loans

  1. 1. Securing Retirement with Home Equity Conversion Mortgages
  2. 2. Agenda HECM Basics Borrower Protections Fees/Costs Product Misconceptions Loan Amounts Accessing Funds Retirement Strategies Right-Sizing the Home San Diego Mortgage and Loans 760-500-1098 2
  3. 3. Retirement Planning Using Home Equity Home Equity: The 4th component Using home equity can help supplement retirement income and provide increased cash flow Retirement Account & Savings • Provides tax-free cash* Home Equity • Requires no monthly mortgage payments** • Homeowners stay in their home & retain title Social Security Pension *Homeowners should consult their tax advisor **Homeowners continue to pay property taxes, homeowner’s insurance, keep up home maintenance. Although there are no monthly mortgage payments, interest does accrue on the portion of the loan amount disbursed. 3 San Diego Mortgage and Loans 760-500-1098
  4. 4. HECM Basics San Diego Mortgage and Loans 760-500-1098 4
  5. 5. What is a HECM? A Home Equity Conversion Mortgage, HECM, is a loan that an individual can take using the equity that they have built up in their home. Program Features: • Improves monthly cash flow by eliminating debt • No monthly mortgage payments due1 • Loan proceeds are tax-free2 • Heirs inherit any remaining equity • Net proceeds can be accessed in multiple ways • Interest may be tax deductible when HECM is repaid3 1 Homeowners continue to pay property taxes, homeowner’s insurance, keep up home maintenance. Although there are no monthly mortgage payments, interest does accrue on the portion of the loan amount disbursed. 2 Homeowners should consult their tax advisor. 3 IRS Website - http://www.irs.gov/publications/p936/ar02.html San Diego Mortgage and Loans 760-500-1098 5
  6. 6. Eligibility • Youngest borrower must be at least 62+ years of age • Homeowner must live in home as primary residence (6 mo. + 1 day) • Must be able to pay off their existing mortgage using the HECM loan proceeds • Property must be an eligible property type San Diego Mortgage and Loans 760-500-1098 6
  7. 7. Additional Conditions • Borrower(s) must complete a HUD approved 3rd party counseling session • Property must be maintained according to FHA requirements • Borrower(s) must continue to pay property taxes and homeowners insurance • Lending limit of $625,500 • HECM loan must be in first lien position San Diego Mortgage and Loans 760-500-1098 7
  8. 8. Borrower Protections Non-recourse loan 3rd party counseling Lien-holder not added to title Property satisfies lien Anti-steering regulations Right of rescission 8 San Diego Mortgage and Loans 760-500-1098
  9. 9. Program Protections – Repayment Events No payments are required until a repayment event occurs. Repayment events regulated by HUD guidelines 1. Fails to pay taxes/insurance 2. Borrower no longer lives in/sells property 3. Fails to keep home up to FHA standards San Diego Mortgage and Loans 760-500-1098 9
  10. 10. Loan Fees Reverse mortgages have many of the same fee types as a traditional forward mortgage: Loan Origination Fee Calculation to determine amount $6,000 maximum 3rd Party Closing Costs Examples Appraisal, flood certification, title insurance, notary, courier, recording, etc. 3rd Party Closing Costs Varies, depending on state/county 10 San Diego Mortgage and Loans 760-500-1098
  11. 11. Reverse Mortgage Specific Fees There are two types of reverse mortgage specific fees, counseling and mortgage insurance premium (MIP): Counseling $75 - $125 average fee HUD provides grant support making it possible to get for free Ongoing Mortgage Insurance Premium 1.25% of loan balance annually Upfront Mortgage Insurance Premium .5% or 2.5% of max claim amount (depending on mandatory obligations) 11 San Diego Mortgage and Loans 760-500-1098
  12. 12. Program Misconceptions Myth # 1: The lender owns the home Reality: Borrower retains title to home, no one is added Myth #2: The home must be free and clear of existing liens Reality: HECM designed to pay off existing liens Myth #3: Loan proceeds are taxed Reality: HECM proceeds are not income, therefore not taxed Myth #4: There are restrictions on how to use proceeds Reality: Any proceeds remaining after paying off liens can be used however the borrower wants, no restrictions Myth #5: Only poor people need HECMs Reality: HECMs provide an opportunity to diversify a portfolio and help ensure against overdrawing existing retirement assets San Diego Mortgage and Loans 760-500-1098 12
  13. 13. HECM Loan Amounts – Net Proceeds Equity Available (Principal Limit) Example: $500,000 Home Value At Age 62, 72 & 82 $320,000 $310,000 $310,500 $300,000 $290,000 $287,500 $280,000 $270,000 $260,000 $263,000 $250,000 $240,000 $230,000 62 13 72 82
  14. 14. Accessing Funds San Diego Mortgage and Loans 760-500-1098 14
  15. 15. Disbursement Options - Fixed Fixed Rate Loan: With a fixed rate HECM, all proceeds available in the first 12 months are disbursed to the client at funding. No additional funds will be made available. 15 San Diego Mortgage and Loans 760-500-1098
  16. 16. Disbursement Options - ARM Lump Sum: Draw some of the available cash at closing* Credit Line: Access money when they need it. Does not add to loan balance until used. Available amount of borrowing power can grow.* Monthly Disbursements: Guaranteed monthly disbursements. Disbursements set for a specific period of time (Term) or for the life of the loan (Tenure). Does not add to loan balance until used.* Combination: Choose 1, 2 or all 3 options simultaneously* (changing disbursements also available) *HUD limits amount of first year withdrawal to 60% of the principal limit or the borrowers mandatory obligations + 10%, whichever is greater. 16 San Diego Mortgage and Loans 760-500-1098
  17. 17. LIBOR Disbursement – Line of Credit $800,000 Example: $500,000 Home Value 62 Year Old Borrower $760,298 Available Line of Credit $700,000 $600,000 $526,511 $500,000 $400,000 $364,613 $300,000 $252,497 $200,000 At age 62 + 10 Years + 20 Years + 30 Years Line of Credit growth over the course of 30 years 17 Source: Liberty Home Equity Solutions, Inc., Quote Packages October 7, 2013. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  18. 18. LIBOR Disbursement – Tenure Payments Example: $500,000 Home Value 62 Year Old Borrower $600,000 Total Payments Received $523,350 $500,000 $400,000 $348,900 $300,000 $200,000 $174,450 $100,000 $0 10 Years 20 Years 30 Years $1453/Month Throughout Retirement 18 Source: Liberty Home Equity Solutions, Inc., Quote Packages Oct 17, 2013. For business professional use only. Not for consumer distribution. The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  19. 19. HECM Strategies for Retirement San Diego Mortgage and Loans 760-500-1098 19
  20. 20. Hedge Against Home Declines Impact on HECM LOC in declining housing market $600,000 $530,604 $500,000 $500,000 $424,483 $400,000 $338,779 $282,645 $300,000 $271,751 $271,669 $252,497 $200,000 $100,000 $0 62 63 64 65 Line of Credit 66 67 68 69 70 Home Value Amount available dependent on home value No monthly mortgage payments required Available LOC balance will continue to grow if no draws are taken, regardless of home value Source (LOC): Liberty Home Equity Solutions, Inc., Quote Packages October 7, 2013. Source (Home Values): No supporting documentation available. Declining home values are based on assumptions due to the economic climate in recent years. San Diego Mortgage and Loans 760-500-1098 20
  21. 21. Case Study - Deferring Social Security Client Facts: Solution: 21 62 year-old clients need to retire due to health issues. $200,000 in retirement account, relying on social security. Claiming social security now will not provide enough income. Home value is $500,000. No current mortgage. Use a HECM to increase cash flow to a sufficient amount to allow them to retire now, but wait until age 70 to claim social security. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  22. 22. Claiming Social Security Monthly Social Security Payments Monthly Disbursements By Age $3,500 $3,447 $3,000 $2,500 $2,437 $2,000 $1,958 $1,500 $1,000 62 65 70 Age of Claiming Social Security Source: AARP online social security website calculator. $40,000 avg salary for one spouse, $20,000 avg salary for other spouse. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice. 22
  23. 23. Monthly Reverse Mortgage Payments Deferring Social Security HECM Options $3,500 $3,338 $3,000 $2,500 $2,000 $2,016 $1,500 $1,453 $1,000 Tenure @ 62 8 year term w/100k LOC 8 year term w/out LOC SS = $1958/Month @ age 62 SS = $3447/Month @ age 70 23 Source: Liberty Home Equity Solutions, Inc., Quote Packages October 17, 2013. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  24. 24. HECM Strategies: Deferring Social Security Probability of successfully deferring SS Source: MoneyGuide Pro Illustration July, 2012 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice. San Diego Mortgage and Loans 760-500-1098 24
  25. 25. Case Study – Stretching Retirement Account Client Facts: Assumptions: Need $40k (plus SS) in first year, 3% annual cost of living inflation,15% tax bracket, S&P 500 annual returns (1983 – 2012) used for ROI Solution: 25 62 year-old clients, $500k retirement account, home value $500k, current mortgage $0. Use HECM funds to offset increase cost of living expenses to extend portfolio. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  26. 26. HECM Solution – Stretching Retirement Account No HECM With HECM $2,000,000 $1,800,000 Account Balance $1,600,000 $1,400,000 $1,200,000 $1,000,000 $800,000 $600,000 $400,000 $200,000 $0 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 Age Savings Stretch From 18 to 30+ Yrs 26 Source: Calculations based on assumptions listed on previous slide. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  27. 27. Case Study – Allow Retirement Account Rebound Client Facts: Assumptions: Need $40k (plus SS) in first year, 3% annual cost of living inflation,15% tax bracket, S&P 500 annual returns (1983 – 2012) used for ROI Solution: 27 62 year-old clients, $500k retirement account, home value $500k, current mortgage $0. Need $40k (plus SS) in first year Use HECM funds to during S&P 500 down years to allow value of assets in retirement account to rebound. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  28. 28. HECM Solution – Retirement Account Rebound $1,400,000 40.00% 34.11% 31.01% Account Balance 21.27% 16.81% 17.62% 13.62% $1,000,000 2.34% $800,000 23.45% 20.26% 8.03% 3.00% 12.78% 20.00% 10.00% 3.53% 0.00% -9.85% -10.14% -10.00% $600,000 -20.00% -23.37% -30.00% $400,000 -38.49% -40.00% $200,000 -50.00% $0 -60.00% 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 Age : Living expenses drawn from retirement account : Living expenses drawn from HECM LOC Line of Credit balance = $400,000 at age 93 28 Source: S&P 500 from 1983-2012 and calculations based on assumptions listed on previous slide. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice. S&P 500 Returns 30.00% 26.38% $1,200,000
  29. 29. Case Study – Defer Drawdown Until RMD Client Facts: Assumptions: Need $40k (plus SS) in first year, 3% annual cost of living inflation,15% tax bracket, S&P 500 annual returns (1983 – 2012) used for ROI Solution: 29 62 year-old clients, $500k retirement account, home value $500k, current mortgage $0. Need $40k (plus SS) in first year Use HECM funds to delay draws from retirement account until RMD is required. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  30. 30. HECM Solution – Defer Drawdown Until RMD No HECM With HECM Account Balance $3,000,000 $2,500,000 $2,000,000 $1,500,000 $1,000,000 $500,000 $0 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 Age HECM LOC covers expenses through age 68 $770k remaining in retirement acct @ age 93 30 RMD exceeded necessary expenses age 78 - 89 $415k left in LOC if excess RMD paid back into RM Source: Calculations based on assumptions listed on previous slide. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  31. 31. RIGHT-SIZING THE HOUSE For business and professional use only. Not for consumer distribution. 31
  32. 32. Right-Sizing the Home Example Client Facts: 70 years-old $500,000 current home $0 existing mortgage $350,000 new home Does not want any monthly mortgage payment with new home San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice. 32
  33. 33. Right-Sizing the Home Example – No HECM Sales price existing home: $500,000 Selling costs (commission, fees etc.): $40,000 Net proceeds: $460,000 New home price: $350,000 Remaining funds: $110,000 San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice. 33
  34. 34. Right-Sizing the Home Example – HECM Net proceeds from home sale: $460,000 New home price: $350,000 HECM for Purchase funds: $197,400 Borrower funds to complete purchase: $166,853 (includes loan closing costs) Remaining funds: $293,147 Source: Liberty Home Equity Solutions, Inc., Quote Packages October 16, 2013. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice. 34
  35. 35. Summary Transaction similar to home refinance It’s Flexible • Fixed or adjustable rate • Proceeds may be accessed in multiple ways and borrowers can change disbursement methods It’s Safe • FHA insured (HECM) It’s Useful • Use as a monthly cash flow tool • Credit line • Relieves existing debt and monthly mortgage payments • Purchase a home (right-size or move to “retirement friendly” community) • Consumer counseling required San Diego Mortgage and Loans 760-500-1098 35
  36. 36. Thank you for your time. San Diego Mortgage and Loans 760-500-1098 San Diego Mortgage and Loans 760-500-1098
  37. 37. APPENDIX 37 San Diego Mortgage and Loans 760-500-1098
  38. 38. S&P 500 Annual Returns S&P 500 Annual Return 40.00% 34.11% 30.00% 26.38% 21.27% Annual Return 20.00% 16.81% 17.62% -10.00% 23.45% 19.53% 13.62% 7.06% 10.00% 0.00% 20.26% 2.34% 0.35% 3.00% 3.53% 0.00% -1.54% -10.14% -9.85% -20.00% -23.37% -30.00% -38.49% -40.00% -50.00% 62 63 64 65 66 67 68 69 70 71 72 73 74 75 76 77 78 79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 Age Annual returns of the S&P 500 beginning in 1983 and ending in 2012 Age 62 is assumed to be 1983, 63 is 1984, etc. 38 Source: S&P 500 from 1983– 2012. San Diego Mortgage and Loans 760-500-1098 The preceding example and any calculations therein are hypothetical and are for illustrative purposes only. We do not guarantee applicability or accuracy in regard to client’s individual situation or circumstance. Information contained within this strategy is not intended to replace qualified, professional investment and/or tax advice.
  39. 39. Glossary of Terms • Adjustable Rate HECM (ARM) – A HECM which has an interest rate that is subject to change, usually on a monthly or annual basis. • U.S. Department of Housing and Urban Development (HUD) • Federal Housing Administration (FHA) • Home Equity Conversion Mortgage (HECM) – A reverse mortgage insured by the Federal Housing Administration. • Good Faith Estimate – Lists the approximate closing costs of obtaining a loan. • HECM for Purchase – A HECM that is used to help finance the purchase of the borrower’s principle residence. • Lender – A bank or institution licensed to originate residential mortgage loans. • London Interbank Offered Rate (LIBOR) – The average interest rate that leading banks in London charge when lending to other banks. It is the index used as the basis for Adjustable Rate HECM's. San Diego Mortgage and Loans 760-500-1098 39
  40. 40. Glossary of Terms (continued) • Line of Credit (LOC) – A HECM disbursement option whereby the borrower receives the loan proceeds in unscheduled payments or installments, at times and in amounts of the borrower’s choosing, until the line of credit is exhausted. • Lump Sum – Receive all proceeds at loan closing. • Non-Recourse Loan – In regards to a HECM loan, this term describes the fact that a borrower or their heirs will not owe more than the home is worth when the home is sold to repay the loan. • Mortgage Insurance Premium (MIP) – Protects the borrower and lender in case the loan balance grows higher than the home value when the loan becomes due. • Reverse Mortgage – A home loan that allows senior homeowners age 62 and older to access a portion of the equity in their home. San Diego Mortgage and Loans 760-500-1098 40
  41. 41. Glossary of Terms (continued) • Servicing – The maintenance of the loan after it is originated. It includes services such as providing regular statements and providing loan disbursements to the borrower as requested. • Tenure payments – Monthly payments throughout the life of the loan. • Term payments – Equal monthly payments that are disbursed for a specified amount time. • Total Annual Loan Cost (TALC) – The projected annual average cost of a reverse mortgage, including all the itemized costs. • Right of rescission – A three business day time period after a loan closes in which a borrower may change their mind and cancel the loan. San Diego Mortgage and Loans 760-500-1098 41

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