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Reverse Mortgage Seminar

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This is a presentation I have given many times over the years- hope you can learn from it. http://www.yourorlandomortgage.com

Reverse Mortgage Seminar

  1. 1. Reverse Mortgages
  2. 2. What We Will Cover Today  What is reverse mortgage?  Who and what is eligible for a reverse mortgage?  What types of reverse mortgages are there?  Counseling Requirement  Lending Factors  Current Rates  Payment Options  Interest Rate Options  Closing Costs & Fees  Facts to Know  Repayment Requirements  Reverse Mortgage Examples  Other options  Where to go for more information  Reverse Mortgage Trends 2
  3. 3. What is a Reverse Mortgage?  A special type of home loan that lets a homeowner convert a portion of the equity in his or her home in cash.  The equity built up in the property can be paid to the owner.  No repayment is required until the borrower(s) no longer use the home as their primary residence. 3
  4. 4. Who is eligible for a reverse mortgage?  Homeowners  Primary Residence  62 Years of age or older  Any debt on home must be included on new loan  No subordinate loans allowed 4
  5. 5. What properties are eligible for a reverse mortgage?  Owner-occupied  Single family homes, two-to-four unit properties, condominium units, and units in qualified planned unit developments.  Properties in trusts and qualified leasehold estates  Cooperatives and other properties may only be available in investor sponsored programs. 5
  6. 6. What types of reverse mortgages are there?  Home Equity Conversion Mortgage (HECM)  Federally insured product  Represents 90% of all Reverse mortgage transactions  Based on FHA loan limits & guidelines.  Fannie Mae Home Keeper  Allows higher loan limits than HECM program.  Home Keeper for Home Purchase  Allows for purchase of new home with a reverse mortgage.  Private/Investor Programs  Allows for higher loan amounts.  Allows for unusual properties or other situations not typically allowed by FHA or Fannie Mae. 6
  7. 7. Counseling Requirement  As a pre-application requirement, all borrowers are required to seek counseling from approved agency.  Face-to-face counseling required from HUD approved counseling agency  Face-to-face or telephone counseling allowed through AARP counselor.  Given needed certificate upon completion  Required topics:  Information on reverse mortgages  Determines eligibility  Discusses other options available to assist. 7
  8. 8. Lending Factors  Your age  Appraised home value  Current interest rates  Location of your home 8
  9. 9. Current Rates Interest Rate = 4.82% APR = unlike traditional loans, the APR on Reverse Mortgages can vary greatly and can, in fact get very high. The APR on each loan is determined by rate and repayment time. 9
  10. 10. Payment options  Tenure- equal monthly payments as long as at least one borrower continues to occupy the property as their primary residence.  Term- equal monthly payments for a fixed period of months selected.  Line of Credit- unscheduled payments or in installments, at times and in the amounts of the borrower’s choosing until the line of credit is exhausted.  Modified Tenure- combination of line of credit with monthly payments for as long as the borrower remains in the home.  Modified Term- combination of line of credit with monthly payments for a fixed period of months selected by the borrower. 10
  11. 11. Interest Rate Options  Annually-adjustable rate  Adjusted yearly based on movement in the one- year U.S. Treasury Security rate (t-rate)  Capped at 2% increase/decrease per year and 5% increase/decrease over the life of the loan  Monthly-adjustable rate  Life cap only- 10%  Allows for higher initial advances  Most Common choice for HECM. 11
  12. 12. Closing Costs & Fees  Origination Fee = 0-2%  Mortgage Insurance Premium  2% of loan amount at close  .5% of loan amount on annual basis  Normal closing costs- appraisal, title, document preparation, etc.  Servicing Set-Aside  $30-35 per month for life of the loan  Covers projected costs of servicing 12
  13. 13. Facts to Know  No tax implications for cash received.  No direct implications for social security or other income related benefits.  No restrictions on the use of the money.  Normally closing costs are significantly greater. 13
  14. 14. Repayment Requirement  Death of all borrowers on loan.  Sale of the property.  Home is no longer a primary residence.  Borrower transfers title of the home. 14
  15. 15. Reverse Mortgage Examples FHA/HUD Fannie Mae Private/Investor Monthly HomeKeeper Programs CASH AVAILABLE Cash Available Without Liens $93,321 $51,551 $49,861 Cash Available After Paying Off Liens $68,321 $26,551 $24,861 OR MONTHLY INCOME Monthly Income Without Liens $544 $404 N/A Monthly Income After Paying Off Liens $399 $208 N/A Monthly Savings By Paying Off Liens $500 $500 $500 Net Additional Monthly Income $899 $708 $500 OR LINE OF CREDIT Creditline Available After Paying Off Liens $68,321 $26,551 $24,861 Annualized Growth Rate 5.46% N/A 5.00% Creditline Value In 5 Years $89,133 $26,551 $31,729 Creditline Value In 10 Years $116,285 $26,551 $40,495 OR ANY COMBINATION OF THE ABOVE For example: 1/2 Cash Available, 1/4 Monthly Income and 1/4 Line of Credit. 15 Assumptions: Age Information: 01/01/1940 Nearest Age: 65
  16. 16. Other Options  Home Equity Line of Credit  Banks  Brokerage/investment houses  Option ARM mortgages  4 Payment options  30 Year amortization  15 Year amortization  Interest only payment  Minimum payment (1.0-3.0%)  Interest Only loans 16
  17. 17. Where to go for more information?  www.aarp.org  www.reverse.org  www.reversemortgage.org  www.hud.gov  Reverse Mortgage Calculator  www.financialfreedom.com 17
  18. 18. Reverse Mortgage Trends  Federally insured loans increased from less than 6000 in 2000 to over 38,000 transactions in 2004.  Represent over $6 billion in volume in 2004.  90% of all reverse mortgages are part of the federally insured “HECM” program.  According to Wall Street Journal 4/26/05 “Tool Designed to Cover Basic Needs is Used Increasingly for Second Homes and Luxury Items” 18
  19. 19. Leading Reverse Mortgage Lenders  Look for a professional  Wells Fargo Mortgage  www.wellsfargomortgage.com  IndyMac Bank  www.indymac.com 19
  20. 20. Questions? Thanks for your time Travis BeMent Loan Consultant YourOrlandoMortgage.com (407) 619-4432 20

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