An Overview of Reverse Mortgages In 1987 President Ronald Reagan authorized the Department of Housing and Urban Development (HUD) to create the Home Equity Conversion Mortgage (HECM) which is commonly referred to as a Reverse Mortgage.

An Overview of Reverse Mortgages All HECM Reverse Mortgages are insured by the Federal Housing Administration (FHA) which estimates that the HECM will grow in use to represent approximately 50% of all FHA insured loans based on its current growth rate and the changing financial needs of an aging population.

Remember When… As a young person, we were all encouraged to buy rather than to rent a home? Then we diligently did everything we could to try to pay off the mortgage as fast as possible so we wouldn’t have a mortgage payment when we retired.

The Question Is… Can you use some of the equity that has built up in your home… The answer is YES , if you are 62 or older! Without having to have a monthly mortgage payment… Without negatively impacting the continued appreciation on your home… And without risk of losing your home because you did?

The HECM Reverse Mortgage is… Based on age, value of your home and interest rate. No monthly mortgage payment. Do not need good credit or income to qualify. Nor are other assets at risk. Repaid upon death, change of primary residence or the sale of home.

Why Did HUD Develop The HECM? Response to changing needs of aging population. Most have not saved enough for retirement. Increased taxes, inflation and medical expenses taken a toll on many retirees. People living longer - beyond their ability to fund basic needs. Changed family structures. Government sponsored programs being exhausted.

Why Did HUD Develop The HECM? The only pool of money large enough to respond under the control of interested parties is the equity in seniors homes. Total equity in the homes of people over 62 is almost twice the value of all the money in all of the retirement plans in the USA. Baby Boomers turning 62 at 8,000 per day for the next 20 years. HUD sponsored the HECM to make it easy and affordable for people 62 and older to use some of their equity if needed.

An Interesting Fact About Equity In A Home Is That While It Has Value… Equity is a dormant asset. Equity does not impact the value of the home. Equity can be separated from the home without impacting the current or future appreciated value. Separating equity from the home results in your having two assets working for you instead of just one. Equity Home Value Equity grows by the appreciated market value which has nothing to do with the equity in the home.

How Much Would You Be Eligible For? That depends primarily upon three factors: The age of the youngest borrower (must be at least age 62) The value of the property The expected interest rate 1 2 3 $ Determines Amount Available

How Can You Receive The Money? Proceeds can be received in three ways. 1. Lump Sum Payment. 2. Monthly Disbursements. 3. Equity Line of Credit. Or any combination of the three. All money is Tax Free ! Does not impact pension, Social Security or Medicare.

Hypothetical Sample Assume $50,000 owed on current mortgage and/or other debts with $1,000 monthly payment. Assume $150,000 available from a Reverse Mortgage at a 6% rate. $50,000 of the Reverse Mortgage loan proceeds are used to pay off current mortgage and debts…this improves monthly cash flow by $1,000 (no longer required for monthly payments). $100,000 resides in the equity line for Long Term Care or other emergency needs. Annual growth in available funds from the equity line averages $542 per month.

Hypothetical Sample Resulting in $1,542 improvement in monthly cash flow and a constant $100,000 emergency fund. Interest is only incurred on the actual funds taken out. Home equity is only effected by the actual funds taken out and the interest incurred on those funds. The $100,000 equity line remains as equity in the home should the home be sold. All this maximizes positive impact on monthly cash flow and minimizes negative impact on home equity.

There Are Some Misconceptions About Reverse Mortgages

Misconception #1 You will no longer own your home… Not True You retain ownership Lenders interest is only to the extent of the outstanding mortgage balance. The lender never has ownership of your home.

Misconception #2 Your heirs will have to repay the loan… Not True Reverse mortgages are Non-Recourse loans. The lender can only recover repayment from the value of the property. If the loan amount is greater than the value of the property, the lender is paid the difference from the HUD/FHA Mortgage Insurance .

Misconception #3 A Reverse Mortgage will automatically eat up all of your equity over time. Not True You continue to benefit from all future appreciation Depending on appreciation rate it’s possible you can have an increased equity.

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage Assume three people owned a home worth $200,000 without a current mortgage balance. $200,000 $200,000 $200,000 Value

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage And each took out $100,000 of their equity via a Reverse Mortgage. $200,000 $200,000 $200,000 Value $100,000 $100,000 $100,000 Loan

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage They would each now have $100,000 in cash and $100,000 remaining in the home as equity. $200,000 $200,000 $200,000 Value $100,000 $100,000 $100,000 Loan $100,000 $100,000 $100,000 Equity

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage Now let’s look 20 years into the future and assume each house had a different rate of appreciation. $200,000 $200,000 $200,000 Value 4% 6% $100,000 $100,000 $100,000 Loan $100,000 $100,000 $100,000 Equity 2% Appreciation Rate

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage Each house would now have a much different value. $297,189 $438,225 $641,427 Value 2% 4% 6% Appreciation Rate $100,000 $100,000 $100,000 Loan $100,000 $100,000 $100,000 Equity

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage Assuming each loan had the same 6% interest rate, the loan balance would have grown to $320,714 on each house. $297,189 $438,225 $641,427 Value 2% 4% 6% Appreciation Rate $320,714 $320,714 $320,714 Loan $100,000 $100,000 $100,000 Equity

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage If all three of the homes were sold at that time, each would have a different equity value. $297,189 $438,225 $641,427 Value 2% 4% 6% Appreciation Rate $320,714 $320,714 $320,714 Loan -$23,524 $117,511 $320,714 Equity

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage The first homeowners equity would have all been used to pay off the loan balance, with the loan amount in excess of the home value being paid by the HUD/FHA mortgage insurance. $297,189 $438,225 $641,427 Value 2% 4% 6% Appreciation Rate $320,714 $320,714 $320,714 Loan -$23,524 $117,511 $320,714 Equity Paid by HUD/FHA mortgage insurance.

Examples of How Appreciation Will Impact Your Equity With A Reverse Mortgage Homeowners 2 & 3 would both walk away with the remaining equity, illustrating that a Reverse Mortgage does not automatically eat up all of your equity. $297,189 $438,225 $641,427 Value 2% 4% 6% Appreciation Rate $320,714 $320,714 $320,714 Loan -$23,524 $117,511 $320,714 Equity Net Equity.

Misconception #4 Reverse Mortgages are very expensive. Not True On average Reverse mortgages cost just slightly more than a traditional FHA loan. 100% of the cost can be financed as part of the loan. No up front out of pocket cost required. HUD has established a maximum Origination Fee as well as what the Mortgage Insurance Fee will be.

Another Point Of Confusion Pertains To How Banks Make Money On the Loan If There Are No Payments Being Made By The Borrower All HECM Reverse Mortgages are sold to Fannie Mae. Even the loans that are not FHA insured or sold to Fannie Mae are sold to Wall Street. Fannie Mae ultimately sells all of the loans to Wall Street. Wall Street buys the loans to meet future financial obligations so they are not concerned with monthly payments. Fannie Mae

Another Feature Unique to Reverse Mortgages You must speak with a HUD appointed counselor before being able to apply for a Reverse Mortgage. HUD Counselors are independent of the lenders. They are able to review what was presented to you and advise if it is within the HUD guidelines. A Counselor’s intention is to make sure you fully understand what a reverse mortgage is and how it works. Counseling can take place over the phone if desired.

In Summary Reverse Mortgages are based on age, home value and the interest rate. You continue to own your home and all of the equity remaining in it. There are no monthly mortgage payments. You do not need good credit or income to qualify. Benefits do not effect pensions, Social Security or Medicare. The loan is repaid when the home is sold or upon the death of the borrowers. Repayment is limited to the value of the home, no other assets are ever at risk. All proceeds are tax-free.

The Four Steps To Obtaining A Reverse Mortgage Review Reverse Mortgage options and select the one that best meets your needs and concerns. 1 Speak with the HUD counselor of your choice. 2 Complete and submit the necessary documents. 3 Upon completion of the processing, schedule settlement which can even be at your home. 4

Your NGFS Representative Can Help Help you to review all of your options and answer your questions. Provide you with a written estimate of all cost. Provide you with a written projection of impact on equity . Provide you with a list of HUD Counselors. Be there to assist you at settlement. Having done thousands of Reverse Mortgages across the entire US, we understand your concerns. We are here to:

What Makes NGFS Different From Other Sources For Reverse Mortgages Unlike other sources, our representatives have years of experience in the financial services field and are fully licensed to speak to a broad range of possible options available to a senior to address their objectives and/or needs other than just a Reverse Mortgage. As a show of our appreciation for selecting NGFS to assist with your Reverse Mortgage, we make it possible for you to provide each of your grandchildren, great grandchildren, nieces or nephews with a $5,000 college tuition reward without any cost to you or your family members. NGFS is unique from other sources for Reverse Mortgages in a number of ways, but two of the most notable are...

Next Generation Financial Services While not right for everyone, a Reverse Mortgage can greatly improve the lives of those that it is right for. The only information required to see if it is right for you is: At NGFS, we are here to help The age of the youngest person on the deed (must be a minimum of 62) The address of your home The estimated value of your home and any outstanding debt against it