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Understanding The Reverse Mortgage


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Understanding the Reverse Mortgage and the process by Ken Metcalf, California Reverse Mortgage Broker for American Pacific Mortgage.

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Understanding The Reverse Mortgage

  1. 1. “ A Better Life” HUD/FHA Seniors Loan Program Presented by Ken Metcalf Senior Loan Consultant for American Pacific Mortgage Company Corporate: California Department of Real Estate (DRE) License # 01215943 | NMLS #1850 Kenneth M. Metcalf CA DRE  Broker License # 00276581 | NMLS # 235078
  2. 2. Understanding the Reverse Mortgage
  3. 3. Key Benefits <ul><li>Can eliminate a borrowers current monthly mortgage payment. </li></ul><ul><li>Can provide a line of credit for future periodic use . </li></ul><ul><li>Can provide a stable supplemental monthly income. </li></ul><ul><li>FHA insured. </li></ul><ul><li>Credit is not considered. </li></ul>
  4. 4. Why Do a Reverse Mortgage? <ul><li>Current retirement income is not adequate for desired standard of living . </li></ul><ul><li>High costs of medical insurance, </li></ul><ul><li>healthcare and medications . </li></ul><ul><li>Desire to travel and do things during retirement . </li></ul><ul><li>Excellent means for accessing home equity without the monthly payments to diminish lifestyle . </li></ul>
  5. 5. How Does the Reverse Mortgage Work? <ul><li>Basically, the interest on the borrowed amount accumulates and is added to the principal. Both the accumulated interest and principal are paid back from the sale of the home at a later date. </li></ul><ul><li>Unlike a traditional mortgage the borrower has no responsibility to make monthly or periodic payments as with a traditional mortgage. </li></ul><ul><li>No repayment is required as long as borrowers occupy the property. However, if borrowers repay any portion of the principal, it will be available for them to borrower again . </li></ul>
  6. 6. Qualification Criteria <ul><li>Borrower's must be at least 62 years old. </li></ul><ul><li>Home must be titled in borrowers name or in their trust. </li></ul><ul><li>Home must qualify under HUD standards. </li></ul><ul><li>Home must have adequate equity based on HUD established county limits. </li></ul>
  7. 7. Qualifying Details <ul><li>Counseling Certificate is required by law. </li></ul><ul><ul><li>This is performed through a non-profit company. Counseling takes about 45 minutes and can be done in person or over the phone . </li></ul></ul><ul><li>Home will have a HUD appraisal. </li></ul><ul><li>May require hold-back for maintenance issues. </li></ul><ul><li>Will require a structural engineer if manufactured home on permanent foundation.* </li></ul><ul><li>* Most, if not all, of the above items may be included in closing costs. </li></ul>
  8. 8. Qualifying Example <ul><li>Age 89 </li></ul><ul><li>Home Value $350,000 </li></ul><ul><li>HUD Value Limit $417,000 </li></ul><ul><li>Old Mortgage $ -0- </li></ul><ul><li>HUD Maximum Loan Limit $297,850 </li></ul><ul><li>Monthly payment of $2828 or LOC of $280,083 </li></ul><ul><li>Age 72/74 </li></ul><ul><li>Home Value $350.000 </li></ul><ul><li>HUD Value Limit $417,000 </li></ul><ul><li>Old Mortgage $101,000 </li></ul><ul><li>HUD Maximum Loan Limit $250,250 </li></ul><ul><li>Elimination of $455.04 mortgage payment and a LOC for $129,058 . </li></ul>Additional funds may be available in the future through the streamline refinance process or changes in the HUD county lending limits.
  9. 9. Primary Types of Reverse Mortgage Loans <ul><li>Annual Adjustable rate </li></ul><ul><li>Monthly Adjustable rate </li></ul><ul><li>The amount of principal available to a borrower is based on the type of mortgage a borrower chooses, age and HUD maximum limits. The monthly adjustable typically provides the greatest amount of money and is the most popular choice among borrowers . </li></ul>
  10. 10. Payment Options <ul><li>Lump sum to pay off an existing mortgage or for any other reason such as purchasing a new car. </li></ul><ul><li>Line of Credit similar to an equity line. </li></ul><ul><li>Monthly fixed payment. </li></ul><ul><li>Combination of 1, 2 or 3. </li></ul><ul><li>Borrower can change payment options monthly if they choose for a small fee, typically $20 per change . </li></ul>
  11. 11. More about the Line of Credit <ul><li>If the borrowers choose the LOC option, they will find that the LOC grows annually. The growth rate is the interest rate charged during the loan. This means that every year the LOC increases allowing more funds to be available to the borrowers in future years. </li></ul><ul><li>For example, a typical reverse mortgage may have a 6.5% interest rate during year 1. At the end of the year a $150,000 LOC would then be at $159,750 allowing borrowers to access a little more of their equity . </li></ul><ul><li>The fixed monthly payment option already factors in an anticipated growth rate. </li></ul>
  12. 12. Line of Credit Illustration
  13. 13. Calculating Available Funds <ul><li>Go to the following web site: </li></ul><ul><ul><li> </li></ul></ul><ul><ul><li>Click on ‘Calculator’ </li></ul></ul><ul><ul><li>Input items 1 thru 5 and hit calculate </li></ul></ul><ul><ul><li>Hit Loan Summary for better overview </li></ul></ul>
  14. 14. Drawbacks to Reverse Mortgage <ul><li>Equity in home will diminish with each passing year as interest accumulates. This means less equity in your estate to be passed on to heirs. </li></ul><ul><li>Closings Costs include a 2% loan fee, mortgage insurance fee of 2% payable to the federal government, and other normal closing costs. </li></ul><ul><li>Interest is not tax deductible until home is sold or paid off . </li></ul>For most, the benefits far out-weigh the drawbacks .
  15. 15. Commonly Asked Questions <ul><li>Do I lose my home once I do a Reverse Mortgage? No, it is still your home and you can sell or refinance at any time. You are still responsible for paying your property taxes, homeowners insurance and normal maintenance . </li></ul><ul><li>Do I have to live in the home? You must live in the home for 6 months out of the year. If you don’t live in the home for 12 consecutive months or more you may be required to sell. </li></ul><ul><li>Can I rent out the home ? No, you cannot convert the home to a rental property. </li></ul>
  16. 16. More questions <ul><li>What happens to my remaining equity when I die or sell? The remaining equity goes to your estate just as it would with a normal mortgage. </li></ul><ul><li>What happens if the accumulated principal & interest is more than the value of the home when it is sold? The FHA insurance pays the difference. You or your estate have no responsibility to pay any loss. The reverse mortgage is a non-recourse mortgage. Any other assets you may have are protected because of the FHA insurance . </li></ul>
  17. 17. Thank you for your time I hope you have a better understanding of Reverse Mortgages
  18. 18. Ken Metcalf <ul><li>American Pacific Mortgage </li></ul><ul><li>1-800-266-9010 </li></ul><ul><li>E-mail: ken [email_address] </li></ul><ul><li>Website: </li></ul><ul><li>Contact me to answer any questions </li></ul>
  19. 19. Don’t go away yet This is important Hey! One more thing
  20. 20. Why Choose…
  22. 22. We are members of…
  23. 23. AMERICAN PACIFIC MORTGAGE To unlocking your home equity is the lender of choice
  24. 24. We have local representatives who can meet with you in your home We are always available for any local assistance
  25. 25. <ul><li>Our agents are licensed </li></ul><ul><li>by the </li></ul><ul><li>California Department </li></ul><ul><li>of </li></ul><ul><li>Real Estate </li></ul>
  26. 26. <ul><ul><li>We are </li></ul></ul><ul><ul><li>experienced and </li></ul></ul><ul><ul><li>dedicated </li></ul></ul>
  27. 27. <ul><ul><li>We are licensed in 18 states and have over 150 branches </li></ul></ul>
  28. 28. We work “ hands on” to make sure your reverse mortgage is completed as quickly and as efficiently as possible
  29. 29. We directly handle and control all aspects of the loan processing functions from the application to closing Our processing time frame is typically the fastest in the industry
  30. 30. NO upfront out of pocket fees! We are firm in maintaining our policy of requiring…
  31. 31. HUD and Fannie Mae have consistently recognized American Pacific Mortgage for our leadership in the reverse mortgage industry, as well as for our integrity, knowledge and experience.
  32. 32. What have our clients said about us…
  33. 33. Dear Ken, Just a message to repeat how much we appreciated your time and concern over our introduction to, and your follow –through on our Reverse Mortgage arrangements. Your thoroughness in walking us through all the details and your immediate responses to our questions whether asked or
  34. 34. faxed to you gave us unsurpassed confidence in you. Again, thank you for your concern and attention to us. It was our pleasure to meet with you and work with you. Sincerely, Mr. and Mrs. Herbert S.
  35. 35. My mother, Wilma R., and I want to thank you for your assistance and patience in completing her reverse mortgage. Even though the process was initiated in northern California and then had to be completed in southern California, you and your associates handled the details seamlessly.
  36. 36. She received funding directly to her bank account right on schedule and with these monthly installments her care and security are guaranteed. Thank you again, David R.
  37. 37. My home, un-mortgaged, was 38 years old and in need of some upgrading. At 77, I was in need of some financial upgrading. The Reverse Mortgage appeared to fit my situation and after reviewing three proposals I chose Ken Metcalf. My experience with Ken was
  38. 38. very professional and everything clearly explained and every question answered. I chose a line of credit and a modest monthly cash withdraw. I have used the credit line to modernize the master bathroom, install insulated windows and replace the 38 year –old furnace and A/C units. My monthly statement clearly defines where every dollar is
  39. 39. accounted for-loan balance, current interest, credit line balance and the monthly increase in my net principal limit. I am a happy client of Ken and would recommend him to anyone thinking about a Reverse Mortgage. Robert C.
  40. 40. Ken My wife and I applied for a reverse mortgage May of 2003. It was the best move we ever made. My wife is 81 and I am 82. We found that our fixed income was falling a little short of meeting with our financial needs and that our savings would be depleted in a short time if we did not figure a way to bring in some extra income. We owned a home but was still making payments on our home loan.
  41. 41. It only took a short length of time to apply, have our home appraised and loan approved and we had the funds available. Now we not only are free of house payments but have the financial freedom to use the money in any way we desire, and it’s tax free. So I say to my fellow senior 62 or over to go for the gusto and enjoy yourself, inquire into the Reverse Mortgage Program. Thank you ever so much, Marty and Ruth
  42. 42. Happy Holidays to All, who made my life so much easier. I am enjoying the reverse mortgage and bragging to all. Thank you again! Sylvia T.