Transcript Slide 1

CLARIFI
Reverse Mortgages
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CLARIFI
1-800-989-2227
About CLARIFI
A Non-Profit Community Service Since 1966
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What is a Reverse Mortgage?
• A loan against your home that you do not have to pay
back for as long as you live there
• A loan that allows you to take out the equity in your
home without having to move or repay a loan each
month
How it works
Reverse mortgages turn your home equity into:
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Loan advances paid to you
Loan costs paid to the lender and others
Leftover equity, if any, paid to you or your heirs at the end
of the loan
FHA’s Reverse Mortgage
• HECM-Home Equity Conversion Mortgages is insured
by the FHA (Federal Housing Administration)
• Reverse mortgages issued under the HECM program
offer the highest loan amount and lowest interest rate
for most home owners
• HECM mortgage ceiling is $625,500*
*This ceiling was raised with the economic stimulus package and may be reset.
Eligibility Requirements
• All borrowers must be 62 years of age or older
• Own the property outright, or have small mortgage
balance
• Occupy the property as your principal residence
• Not be delinquent on any federal debt
• Participate in a consumer information session given be
an approved HECM counselor
Common Uses of Funds
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Healthcare costs
60
Repay existing mortgages
50
Reduce burden on
children
Home repair &
improvement
Pay property taxes
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30
20
10
0
Daily expenses
Travel, something special
Gifts
Reverse Mortgage Provisions
• Homeownership-you remain the owner of your house
and are responsible for paying your property taxes,
homeowner’s insurance and for making needed
repairs.
• You can use the money from the reverse mortgage to
pay the various fees that are charged on the loan.
• When the loan ends, you or your heirs must repay all
the cash advances plus the interest.
Reverse Mortgages Benefits
• Allows you to stay in your home
• Pays off existing mortgages on home
• Simple to qualify because credit score and income are
not considered
• No monthly payments are due as long as you live in
the home
• Proceeds are not taxable
Additional Benefits
• A reverse mortgage cannot get “upside down”, so
heirs will never owe more than the house is worth.
• Heirs inherit the home and keep all equity after the
reverse mortgage is paid off.
• The interest rate is lower than traditional mortgages.
• The program is not well understood by most people
and requires an independent HUD counseling session
prior to receiving the reverse mortgage .
Reverse Mortgages Pay Out
You choose how you want to receive payments:
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Lump sum distribution
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Line of credit
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Monthly income
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Any combination of the above
Reverse Mortgages
Disadvantages
• The closing costs are about the same as the cost of selling
your home.
• Although Social Security and Medicare are not affected,
Medicaid and other need-based assistance can be affected
if you withdraw too much in one month.
• This product and selecting a mortgage company is
confusing for most borrowers.
Reverse Mortgage
Pricing & Fees
Mortgage Insurance
Premium (MIP)
• .01% - 2%
• + 1.25% of loan balance
annually
Origination Fee
• $2,500.-$6,000
Appraisal Fee
• $400-$500
Closing Costs
• $700-and up Servicing Fee
• Up to $35 per month
Interest rate
• Fixed (market based)
• Variable (Libor &
Increment)
When is a Reverse Mortgage a Bad Idea?
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If you only need the money for a short period of
time and can repay the full balance.
Spouse or partner is not on title.
If you don’t need the money right away.
If you are being pressured into a reverse mortgage
to use proceeds for other investments.
On low-equity homes. The closing costs will be a
higher percentage of the home's equity.
Key Questions to Consider
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Who else should I involve in considering this loan?
Which counselor should I choose?
Have I given due consideration to all my choices?
When would be the best time to take out a reverse
mortgage?
• What interest rate should I select?
• Which lender should I choose?
• How should I use this loan?
Exploring your Options
• Property Tax Deferral (PTD) - no repayment required
as long as you live in your home
• Home Equity Loan
• Selling and moving
• Additional Resources
Points to Ponder
You can analyze any reverse mortgage by asking:
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How much would I get?
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How much would I pay?
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How much would be left at the end of the loan?
Canceling the Deal
• You have three business days after closing to cancel
your reverse mortgage.
• You must notify the lender in writing.
• The notice can be hand delivered, mailed, faxed or filed
before midnight of the third business day.
Resources
• www.aarp.org/revmort
• www.reversemortgageguides.org
• www.cccsdv.org
Wrap Up
• Thank you for your attention and participation.
• Are there any questions or comments on today’s
presentation?
• Will you use something you learned here?
• Please take a few minutes and complete the survey
on today’s presentation.
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Contact CLARIFI
CLARIFI
1608 Walnut Street, 10th Floor
Philadelphia, PA 19103
• www.clarifi.org
• 800-989- 2227
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