Reverse mortgages explained
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This document provides an overview of reverse mortgages, designed for homeowners aged 62 and older to convert home equity into income without monthly payments. It covers how reverse mortgages work, their costs, common uses, and protections for borrowers. The document also addresses common misconceptions and outlines responsibilities and counseling requirements for potential borrowers.
Reverse mortgages explained
- 1. Reverse Mortgages Explained First Meridian Mortgage Michael Pinter 2607 Nostrand Avenue Brooklyn, NY 11210 Phone: (718) 906-6132
- 2. Presentation Topics What is a reverse mortgage, how does it work? How can it help me, what are some common uses? What are the costs involved? How am I protected? Common Misconceptions What are my next steps?
- 3. What is a Reverse Mortgage? Enables homeowners age 62 and older to convert their home equity into income without having to sell the home or give up title No required monthly mortgage payments to make while still in the home Loan proceeds are tax-free and may be tax-deductible upon loan repayment* Reverse mortgages are commonly used to payoff existing mortgages, eliminating the monthly payment obligation * Consult a Financial Advisor or Tax Advisor for advise on your unique situation.
- 4. How Can I Receive My Reverse Mortgage Loan Proceeds? * Not all products and loan options are available in all states
- 5. How Does a Reverse Mortgage Work? Loan proceeds available to the borrower are based on two main factors: Age of homeowner(s) Value and location of home Loan is repaid at permanent move out, and repayment never exceeds appraised value of the home Amount repaid is principal, accrued interest and any financed costs
- 6. Hospital/Health Care Costs – Repay Existing Mortgages – Reduce Burden on Children – Home Improvement/Repair – Pay Property Taxes – Daily Expenses – Travel/Something Special – Gifts – 67% 55% 50% 50% 38% 29% 14% 3% What are Common Uses for Reverse Mortgages?
- 7. Reverse Mortgages are Great Options for… Seniors who do not have enough income to make regular mortgage payments Seniors who do not wish to make mortgage payments, or would like to eliminate that monthly payment obligation Seniors who could benefit from a stream of income during their retirement years Seniors who are finding out that traditional retirement income sources (IRAs, pensions, 401(k)s, Social Security) aren’t sufficient to cover everyday living expenses and healthcare needs
- 8. What are the Typical Costs Involved? Borrowers are responsible for closing costs All closing costs can be (and almost always are) funded directly through the loan Closing costs are a little higher than those of any other mortgage loan Typical Loan Closing Costs Include: Appraisal Title search and insurance Recording fees and mortgage taxes Other typical and customary closing costs
- 9. What are My Responsibilities? Keep property taxes current Keep Home Owners Insurance current Maintain property in reasonable condition
- 10. How am I Protected? Reverse Mortgages are Non-Recourse loans (borrower can never owe more than the appraised value of the home at time of repayment) Advance Loan Disclosures and Loan Illustrations are provided at time of application Counseling is required for all Reverse Mortgage Applicants – provided by HUD, AARP and other reputable organizations
- 11. Most Common Reverse Mortgage Misconceptions “ I can be thrown out of my house” or “The Lender will take my home” False , homeowner can stay in home until a loan maturing event occurs Homeowners retain title to the home throughout the loan “ I can owe more than my home is worth” False , homeowner can never owe more than the appraised value of the home at the time the loan is paid off. “ My heirs will be against it” False , experience demonstrates many heirs are generally in favor of Reverse Mortgages, and there are compelling estate planning values to these loans
- 12. Reverse Mortgages and Home Equity Home value Rising loan balance Closing 10 years 20 years 30 years 40 years Results will vary for each customer. Borrowers or heirs typically retain some equity at loan maturity
- 13. Common Questions and Answers Question: “Are borrowers limited on how they can use the money they receive from a reverse mortgage?” Answer: No, the money can be used in any way they like. Common uses are home modifications, healthcare, paying off existing mortgages and supplemental income. Question: “How much money will be owed when the loan has to be repaid?” Answer: The total amount borrowed, which includes any accumulated interest, mortgage insurance premiums, financed origination fees and closing costs will be owed at time of repayment.
- 14. Common Questions and Answers Question: “When does the loan have to be repaid?” Answer: If all borrowers move out of the home for more than 12 consecutive months, sells the home or all borrowers on title passes away, the loan must be paid off. Question: “Is it required that borrower receive counseling before getting a reverse mortgage?” Answer: Yes, counseling is required to ensure borrowers are receiving correct information about reverse mortgages. Counselors will review loan programs, costs and alternative solutions with potential borrowers.
- 15. Questions? For more information please contact us at: First Meridian Mortgage Michael Pinter 2607 Nostrand Avenue Brooklyn, NY 11210 Phone: (718) 906-6132
Editor's Notes
- #13: This means that this is a rising debt or negative amortizing loan. The loan balance keeps growing after the closing because we add interest and servicing fees. However, the borrowers typically retain some equity when the loan matures.