reverse mortgages adam nimmer anders erickson russ sperry
Post on 21-Dec-2015
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reverse mortgage a non-recourse loan against home equity providing cash
advances to a borrower and requiring no repayment until a future time
Reverse Mortgage vs. “Forward” Mortgage
Falling Debt, Rising Equity your debt decreased; and your home equity increased.
Rising Debt, Falling Equity your debt increases; and your home equity decreases.
Two Important Notes
Exception to Falling Equity
Your home value grows at a higher rate.
Maximum Debt
You can never owe more than what your home is worth at the time the loan is repaid.
Who’s Eligible
Individual at least 62 year of Age The home must be the principal residence Single family residence Some 2-4 unit owner-occupied Some condos, PUD, and manufactured
homes Mobile homes and co-ops not eligible
Lump Sum or Credit Line Lump Sum or Creditline When Expected Interest Rate is
Home Value Age 7% 8% 9%
$100,000 65 $38,423 $30,455 $23,920
70 $44,383 $36,771 $30,040
75 $50,815 $43,948 $37,739
80 $57,653 $51,619 $46,056
85 $64,544 $59,532 $54,704
90 $71,257 $67,263 $63,363
Home Value Age 7% 8% 9%
$150,000 65 $60,873 $48,705 $38,720
70 $69,733 $58,121 $48,404
75 $79,265 $68,798 $59,339
80 $89,353 $80,169 $71,706
85 $99,444 $91,832 $84,504
90 $109,157 $103,113 $97,213
Home Value Age 7% 8% 9%
$200,000 65 $83,323 $66,955 $53,520
70 $95,083 $79,471 $66,404
75 $107,715 $93,648 $80,939
80 $121,053 $108,719 $97,356
85 $134,344 $124,132 $114,304
90 $147,057 $138,963 $131,063
Loan Calculator
Calculator:
http://www.rmaarp.com/
Limits:
https://entp.hud.gov/idapp/html/hicostlook.cfm
Single-Purpose
Single-Purpose Federally Insured Proprietary
Can be used for propety taxes, home repairs any purpose any purpose
Availability varies throughout the U.S. varies
Income Elibility most limited to low income no income limit no income limit
Loan-advance types tied to permitted uses all types generally most types
Loan-advance amounts generally the smallest generally the largest largest on highest-value homes only
Cost is generally low moderate high
Offered by state & local government bank & mortgage companies banks & mortgage companies
Backed by state & local government federal government (FHA) private companies
Federally Insured
Single-Purpose Federally Insured Proprietary
Can be used for propety taxes, home repairs any purpose any purpose
Availability varies throughout the U.S. varies
Income Elibility most limited to low income no income limit no income limit
Loan-advance types tied to permitted uses all types generally most types
Loan-advance amounts generally the smallest generally the largest largest on highest-value homes only
Cost is generally low moderate high
Offered by state & local government bank & mortgage companies banks & mortgage companies
Backed by state & local government federal government (FHA) private companies
Lump Sum: HECM vs. Proprietary HECM Proprietary
Total Cash to Consumer 86% 71%
Total Loan Costs 14% 29%
Future Net Home Value 100% 100%
Monthly Advances: HECM vs. Proprietary
HECM Proprietary
Total Cash to Consumer 86% 82%
Total Loan Costs 14% 18%
Future Net Home Value 100% 100%
Proprietary
Single-Purpose Federally Insured Proprietary
Can be used for propety taxes, home repairs any purpose any purpose
Availability varies throughout the U.S. varies
Income Elibility most limited to low income no income limit no income limit
Loan-advance types tied to permitted uses all types generally most types
Loan-advance amounts generally the smallest generally the largest largest on highest-value homes only
Cost is generally low moderate high
Offered by state & local government bank & mortgage companies banks & mortgage companies
Backed by state & local government federal government (FHA) private companies
What do you pay?
Application Fee - $300 appraisal, $60 credit check
Origination Fee – limit of 2%
Closing Costs - $2,000
Servicing Fee - $30 monthly
Interest Rates
Monthly and Annually Adjustable Interest
Monthly Adjustable Annually Adjustable
Expected rate 7.00% 7.60%
Rate cap(s) 10% total 2% per year; 5% total
Servicing fee $35/month $30/month
Lump Sum or Creditline $78,584 $72,570
Monthly Advance $577 $561
Repayment
All reverse mortgages become due and payable when the last surviving borrower dies, sells the home, or permanently moves out of the home.
Fail to pay your property taxes Fail to maintain and repair your home Fail to keep your home insured Declaration of bankruptcy
Summary
reverse mortgage a non-recourse loan against home equity
providing cash advances to a borrower and requiring no repayment until a future time
3 Types 3 Forms of Payments Repayment Eligibility Recommendations
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