Enhance Your Financial Security with a Reverse Mortgage
Bob and Mary are a retired couple, both 68 years old, who want to stay in their home but need to boost their monthly income to pay living expenses. They would like to build a safety net for unexpected expenses. They have heard about reverse mortgage loans, but didn’t know the details. They decide to contact a reverse mortgage advisor to discuss their needs and future goals.
An FHA appraiser performs a thorough assessment of their home. The appraiser determines that their home’s value is $300,000. They currently owe $35,000 on their mortgage, which gives them $265,000
in equity. Bob and Mary can then access $133,8001 of their equity from the reverse mortgage loan. After paying off their existing mortgage they will have access to $85,127.
Current Home Value $ 300,000
Available Principal Limit $ 133,800
Mandatory Obligations $ (48,673)
Total Net Settlement Costs $ (13,673)
Less Current Mortgage $ (35,000)
Other Mandatory Obligations $ (0)_
Available Loan Proceeds $ 85,127
Available Line of Credit
During First 12 Month
Disbursement Period $ 31,607
Available Line of Credit After
Initial 12 Month Disbursement
Period $ 53,520
1 This example is based on the youngest borrower, who is 68 years old, a variable rate HECM loan with an initial interest rate of 4.563% (which consists of a Libor index rate of 2.313% and a margin of 2.250%). It is based on an appraised value of $300,000, origination charges of $5,000, a mortgage insurance premium of $6,000, other settlement costs of $2,673, a mortgage payoff of $35,000; amortized over 193 months, with total finance charges of $60,561.86 and an annual percentage rate of 5.06%. Interest rates may vary. The stated rate may change or not be available at the time of loan commitment.
Access Your Home Equity With a Reverse Mortgage
If you’re looking for ways to supplement your retirement income, a Federal Housing Administration (FHA) insured1 reverse mortgage loan may be the answer. A reverse mortgage loan allows you to access a portion of your home’s equity to obtain tax-free (1) funds without having to make monthly mortgage payments. (2)
If you’re 62 years of age or older and have sufficient home equity, you may be able to get the funds you need to:
• Pay off your existing mortgage (3)
• Continue to live in your home and maintain the title (2)
• Pay off medical bills, vehicle loans or other debts
• Improve your monthly cash flow
• Fund necessary home repairs or renovations
• Build a “safety net” for unplanned expenses
How a HECM Loan Works
We offer FHA insured HECMs; a safe, secure loan that lets you access your home’s equity to get cash for your retirement funding needs.
The amount you receive is based on current interest rates, the age of the youngest borrower and the lesser of the appraised value of your home, or sale price up to the maximum lending limit.
The funds available to you may be restricted for the first 12 months after loan closing, due to HECM requirements. In general, the older you are, the more equity you have in your home and the lower your mortgage loan balance; the more money you can expect from a HECM loan.
Receiving Your Money
The HECM is available as either an adjustable or fixed-rate loan. With the adjustable rate, the rate is adjusted monthly or annually based on the LIBOR (London Inter Bank Offered Rate).
The fixed-rate HECM maintains the same interest rate over the life of the loan. You may need to set aside additional funds from loan proceeds to pay for taxes and insurance.
Repaying the Loan
Loan repayment is not due as long as you meet the loan obligations such as living in the home as your primary residence, continue to pay required property taxes and insurance, and maintain the home according to FHA requirements.
You or your heirs will not be required to pay more than the value of your home at the time the loan is repaid; even if your loan balance exceeds the value of your home, provided you or your heirs decide to sell the home. Best of all, any remaining equity goes to you or your heirs once the loan is repaid.
Applying for a reverse mortgage loan is simple. To be eligible for a reverse mortgage loan, some
key requirements are:
• The youngest borrower on title must be at least 62 years of age or older
• Live in your home as your primary residence and have sufficient equity
• You must be able to pay off your existing mortgage through the reverse mortgage loan proceeds
• Live in a single-family home, two-to-four unit owner-occupied home, FHA-approved condominium or manufactured home that meets FHA requirements
• Must meet financial eligibility criteria as established by HUD
In addition to the eligibility requirements, you must also meet the following conditions to obtain a reverse mortgage loan:
• Complete a HUD approved counseling session
• Maintain your home according to FHA requirements (4)
• Continue to pay property taxes and homeowners insurance