Comparing the Tradeoffs
Benefits
• Continue to live in and own your home
• Receive tax-free income from the cash disbursements
• Choose from monthly income, a line of credit, or a lump sum
• Repay the loan at any time with no penalty
• Owe nothing as long as you occupy your home
• No personal liability for repayment of the loan since it is secured solely by your home (you and your heirs are not personally liable)
• Pass the remaining equity in your home to your heirs
Costs
The total cost of getting a reverse mortgage is about the same as getting a
traditional mortgage on a new home.
Average costs of new home mortgage vs. reverse mortgage
Move into a new home FHA Reverse Mortgage
Fees (appraiser, termite 1% 1%
inspection, title, etc.)
Origination Fees 1% 2%
FHA Mortgage Insurance na 2%
Realtor Commission on sale 3% na
Total Cost 5% 5%
Interest Rate (2007 projected) 5.87% 5.95%
If your home is worth more than $400,000, you may be a better fit for the Advantage program because there is no upper limit to borrowing. The Financial Freedom Advantage program often has no closings costs.
Home Equity Loan vs. Reverse Mortgage
With a home equity loan you make monthly payments until the loan is repaid (in addition to your mortgage payments). You must also have a sufficient debt-to-income ratio to qualify and usually a good credit score. A reverse mortgage pays off any mortgages and is not affected by
income or credit score.
Bye for now
Tuesday, July 24, 2007
Reverse Mortgage uses
What can a reverse mortgage be used for?
After you receive the tax-free funds from your reverse mortgage, it is up
to you to use them however you please. Some retirees choose a reverse
mortgage to have peace of mind and others want to improve their quality
of life.
Common uses for reverse mortgages (AARP and HUD survey)
Gifts- 3%
Travel or something special- 14%
Daily expenses- 29%
Pay Property Taxes- 38%
Home Repair and Improvement- 50%
Reduce Burden on Children- 50%
Repay Existing Mortgage- 55%
Healthcare Costs- 67%
After you receive the tax-free funds from your reverse mortgage, it is up
to you to use them however you please. Some retirees choose a reverse
mortgage to have peace of mind and others want to improve their quality
of life.
Common uses for reverse mortgages (AARP and HUD survey)
Gifts- 3%
Travel or something special- 14%
Daily expenses- 29%
Pay Property Taxes- 38%
Home Repair and Improvement- 50%
Reduce Burden on Children- 50%
Repay Existing Mortgage- 55%
Healthcare Costs- 67%
Tuesday, July 17, 2007
Reverse Mortgage for beginners
What is a Reverse Mortgage?
Reverse mortgages enable eligible homeowners to access the money they have built up as equity in their homes. They are primarily designed to strengthen seniors’ personal and financial independence by providing funds without a monthly payment burden during their lifetime in the home. The major eligibility requirements are that the applicant must be at least 62 years of age and own and occupy a home whose mortgage has been paid in full (or with only a very low
mortgage balance remaining).
Reverse mortgages enable eligible homeowners to access the money they have built up as equity in their homes. They are primarily designed to strengthen seniors’ personal and financial independence by providing funds without a monthly payment burden during their lifetime in the home. The major eligibility requirements are that the applicant must be at least 62 years of age and own and occupy a home whose mortgage has been paid in full (or with only a very low
mortgage balance remaining).
The Benefits of a Reverse Mortgage include:
Tax-free funds for as long as you live in your home
No loan repayment for as long as you live in your home
No income, medical or credit requirements
Retain ownership of your home for life; this is guaranteed as long as you maintain your home,
and pay insurance and real estate taxes
Choose a cash flow plan tailored to your needs
No resrictions on how you may use the funds
A tax-advantaged way to pass on part of your estate today
How to Play it Safe?
The following four steps will help you ensure a successful reverse mortgage experience:
1). Because reverse mortgages offer unique benefits, it is important for you to get a solid grasp of how they work. Among other things, you need to understand the full array of reverse mortgage products available to determine which one is best suited to your financial priorities.
In addition, I can supply you with a list of reverse mortgage counselors with whom
you can discuss reverse mortgages in detail (in person or over the phone). Ask questions. If the answers aren’t clear to you, ask more questions. It’s the counselor’s job to help you understand. If you do not feel that you and your counselor are communicating well, give me a call and I can refer you to someone else.
2). It’s your house, and it should be your decision whether to apply for a reverse mortgage. Sometimes advice from family members or others can be helpful — but don’t let anyone else make up your mind for you. Once you apply, we hope you’ll feel very happy about it. But you still have the right to change your mind until 3 days after the loan is closed
3). How to use the money is entirely up to you. Among other possibilities, you could:
Supplement your retirement income
Buy a new car
Make home repairs
Use it as a financial planning tool
Travel more frequently
Help pay for a grandchild’s education
Cover medical expenses
Sometimes consumers learn about reverse mortgages from a business that offers a particular product or service (such as home remodeling or an annuity). Although most Reverse Mortgage lenders require that all liens be paid off and that the home be in good structural repair at closing, a reverse mortgage funded by Fannie Mae is never contingent upon your spending your money with any particular service provider. You are free to use your reverse mortgage funds in any way you wish. If anyone tries to tell you otherwise, please contact me and we'll get you in contact with a HUD representative.
4). The funds from your reverse mortgage (after closing related transaction costs) are yours alone, as the owner(s) of your home. Even if you plan to use the money to pay someone else later, the funds should always come to you first. Don’t let anyone persuade you to “sign over” the funds. In most cases, Fannie Mae-authorized lenders are obligated to make the check payable to you and to no other third party. Or, if you prefer, you have the right to choose an electronic transfer of the funds directly to your bank account. If you are using your reverse mortgage funds to purchase a new home, the funds will go to the seller at closing as authorized by you.
That's it for today, more to come very soon.
Have a great Tuesday.
Friday, July 13, 2007
How to possibly derive better growth than an annuity without a new investment.
I hope to be able to illustrate a picture for you here about a new take on the use of a reverse mortgage as a retirement planning vehicle.
Technically speaking- if you have an asset that you've already acquired, paid for and sitting on for some time- you wouldn't necessarily think of it as a new investment. At the same time, if that asset had liquidity potential but allowed you to continue to hold onto it- like, hug it and paint it and bake a cake in it, prune and mow it, shovel snow off it, celebrate in it (get the picture) and yet you could generate liquidity out of it, you still probably wouldn't call it a new investment. Your home could be that type of investment if you've considered the purchase of an annuity that you deliberated over and over in your head but couldn't justify depleting a pile of cash that may or may not have tax consequences and may or may not ever be used (like if you're 65 but don't plan to use it until 75). I'm not an annuity sales rep or a financial planner but I am certified to teach/provide continuing education credits for CFPs, CPAs and Realtors as a reverse mortgage expert. Therefore I don't know all the intricacies of an annuity but essentially if you hope to (meaning, want to) generate a certain amount of monthly income later into your retirement and invest a certain amount of money into the product (called a premium) then you can make a new investment in an annuity.
Many annuity contracts are sold with guarantees that provide some principal protection or base-level return. These guarantees usually come with high fees relative to other investment options. Or they may systematically limit upside potential through performance caps and participation rates (meaning how many others invest in it). For instance, variable annuities have several layers of fees that pay for the underlying insurance features and investment funds, so they are unlikely to keep up with equity indexes in the long run. Fixed-indexed annuities guarantee a minimum return and offer a variable interest rate based on an equity index, but contract features such as a cap, spread, or participation rate limit overall returns to a sustainable level for the insurance company.
So... then there's the new HECM Choice, a new reverse mortgage product that offers guaranteed fixed rate growth without investing a new premium, in fact, you've already purchased it several years ago. This new and more flexible version can do a whole host of things for the participant- ALL of them providing more cash flow for some uniquely qualified homeowners over 62 years of age. Unique in that only a certain amount of folks could both qualify and benefit from the new version. Flexible in that it allows for a homeowner to take their available funds in any way they want; monthly, lump or through a high growth line of credit.
Here's a scenario- a 70 year old homeowner in a $650,000 home could pay off a $135,000 mortgage or other combination of debt (which would free up cash flow), get an additional lump sum of almost $70,000 at closing (more cash flow) and the best part of this lesson- leave a line of credit worth $141,000 that has guaranteed growth of 6.310% per year. Guaranteed without caps or participation rates or spread. In 10 years time this same homeowner would have close to $264,000 and if he could take the money in any format he wanted, monthly, a lump or periodic withdrawals as he sees fit. By the way, he doesn't have to wait 10 years, he can access the money after year one and as long as there is money in the line of credit he would experience 6.310% growth.
So how would someone possibly derive better growth than an annuity without a new investment? Why, with a reverse mortgage and the new HECM Choice.
Some housekeeping notes:
HECM Choice loan is a loan, endorsed by HUD. It requires both borrowers to be over 62 years of age to qualify, requires HUD counseling by both borrowers, requires property taxes and homeowners insurance to be paid on time. Requires a certain percentage of existing debt to qualify. The loan is paid back after the homeowner dies, sells or can no longer live in the home. Borrower retains title to home until home is sold.
For more information contact me at 240-506-4611 or rmcinturff@proficiomortgage.com
Technically speaking- if you have an asset that you've already acquired, paid for and sitting on for some time- you wouldn't necessarily think of it as a new investment. At the same time, if that asset had liquidity potential but allowed you to continue to hold onto it- like, hug it and paint it and bake a cake in it, prune and mow it, shovel snow off it, celebrate in it (get the picture) and yet you could generate liquidity out of it, you still probably wouldn't call it a new investment. Your home could be that type of investment if you've considered the purchase of an annuity that you deliberated over and over in your head but couldn't justify depleting a pile of cash that may or may not have tax consequences and may or may not ever be used (like if you're 65 but don't plan to use it until 75). I'm not an annuity sales rep or a financial planner but I am certified to teach/provide continuing education credits for CFPs, CPAs and Realtors as a reverse mortgage expert. Therefore I don't know all the intricacies of an annuity but essentially if you hope to (meaning, want to) generate a certain amount of monthly income later into your retirement and invest a certain amount of money into the product (called a premium) then you can make a new investment in an annuity.
Many annuity contracts are sold with guarantees that provide some principal protection or base-level return. These guarantees usually come with high fees relative to other investment options. Or they may systematically limit upside potential through performance caps and participation rates (meaning how many others invest in it). For instance, variable annuities have several layers of fees that pay for the underlying insurance features and investment funds, so they are unlikely to keep up with equity indexes in the long run. Fixed-indexed annuities guarantee a minimum return and offer a variable interest rate based on an equity index, but contract features such as a cap, spread, or participation rate limit overall returns to a sustainable level for the insurance company.
So... then there's the new HECM Choice, a new reverse mortgage product that offers guaranteed fixed rate growth without investing a new premium, in fact, you've already purchased it several years ago. This new and more flexible version can do a whole host of things for the participant- ALL of them providing more cash flow for some uniquely qualified homeowners over 62 years of age. Unique in that only a certain amount of folks could both qualify and benefit from the new version. Flexible in that it allows for a homeowner to take their available funds in any way they want; monthly, lump or through a high growth line of credit.
Here's a scenario- a 70 year old homeowner in a $650,000 home could pay off a $135,000 mortgage or other combination of debt (which would free up cash flow), get an additional lump sum of almost $70,000 at closing (more cash flow) and the best part of this lesson- leave a line of credit worth $141,000 that has guaranteed growth of 6.310% per year. Guaranteed without caps or participation rates or spread. In 10 years time this same homeowner would have close to $264,000 and if he could take the money in any format he wanted, monthly, a lump or periodic withdrawals as he sees fit. By the way, he doesn't have to wait 10 years, he can access the money after year one and as long as there is money in the line of credit he would experience 6.310% growth.
So how would someone possibly derive better growth than an annuity without a new investment? Why, with a reverse mortgage and the new HECM Choice.
Some housekeeping notes:
HECM Choice loan is a loan, endorsed by HUD. It requires both borrowers to be over 62 years of age to qualify, requires HUD counseling by both borrowers, requires property taxes and homeowners insurance to be paid on time. Requires a certain percentage of existing debt to qualify. The loan is paid back after the homeowner dies, sells or can no longer live in the home. Borrower retains title to home until home is sold.
For more information contact me at 240-506-4611 or rmcinturff@proficiomortgage.com
Reverse Mortgage
This is my first stroll down the blog path and it will pertain to my new venture into Reverse Mortgages. Its meant to help educate and remove any confusion the words may cause.
It should really be called an Home Equity Redeemer instead of Reverse Mortgage. When I bought my house I got a Mortgage, so getting a Reverse Mortgage almost sounds like I'm giving it back. In a way I am, but that could be where the idea of the bank taking the home when the borrower dies comes from. I don't see the bank taking anything from someone redeeming their equity, but its not my say in the naming of the product.
I will be providing links to information and calculators so that you have the information in front of you if you are a senior interested in a Reverse Mortgage or have an interest in helping someone redeem some equity in the interest of giving them the financial assistance they may need at this time.
Stay tuned. I promise I won't leave it stagnant like I see others doing. Please don't hesitate to keep me on my toes as well if you stumble upon me in mid-blog build.
Happy Friday 13th
It should really be called an Home Equity Redeemer instead of Reverse Mortgage. When I bought my house I got a Mortgage, so getting a Reverse Mortgage almost sounds like I'm giving it back. In a way I am, but that could be where the idea of the bank taking the home when the borrower dies comes from. I don't see the bank taking anything from someone redeeming their equity, but its not my say in the naming of the product.
I will be providing links to information and calculators so that you have the information in front of you if you are a senior interested in a Reverse Mortgage or have an interest in helping someone redeem some equity in the interest of giving them the financial assistance they may need at this time.
Stay tuned. I promise I won't leave it stagnant like I see others doing. Please don't hesitate to keep me on my toes as well if you stumble upon me in mid-blog build.
Happy Friday 13th
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