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Reverse Mortgages Explained

Prospect Mortgage, LLC, is a Delaware limited liability company licensed by the California Department of Corporations under the California Residential Mortgage Lending Act. Information is subject to change without notice. This is not an offer for extension of credit or a commitment to lend. No part of this publication may be reprinted or duplicated without expressed written consent of Prospect Mortgage. All logos or brands mentioned herein may be registered trademarks of their respective owners. For professional use only. Not intended for public/consumer distribution. 0508-79

Bob BozanicReverse Mortgage Loan Specialist818-384-8078 CellNMLS# [email protected]


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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?


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• 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, to eliminate the monthly payment obligation

* Consult a Financial Advisor or Tax Advisor for advise on your unique situation.

What is a Reverse Mortgage?


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How Can I Receive My Reverse Mortgage Loan Proceeds?

Create different loan options to suit different borrower needs

Payment Combination

Monthly payments for a specified number of months

Term Monthly Payment

Monthly payments for as long as the homeowner(s) occupy the property

Tenure Monthly Payment

Credit line available for future useLine of Credit

Immediate disbursement of some or all loan proceeds

Lump Sum

DescriptionDescriptionLoan Option*Loan Option*

* Not all products and options available in all states. Loan options are only available on the Adjustable Rate loan. The Fixed Rate loan requires that all proceeds be taken at closing.


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• 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

How Does a Reverse Mortgage Work?


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• 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

Reverse Mortgages are Great Options for…


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• Keep property taxes current

• Keep Home Owners Insurance current

• Maintain property in reasonable condition

What are My Responsibilities?


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HECM For Purchase

• The HECM for Purchase allows the borrower(s) to buy a home and never have to worry about making a payment.

• All the borrowers have to do is come up with the difference in what they qualify for on a reverse mortgage and the sales price.

• Borrower(s) can use their own funds and gift funds.

• Seller financing is not allowed.


How Can Realtors Benefit?

• Opens up a new potential market

• Borrowers who couldn’t otherwise buy a home now may qualify for a reverse mortgage

• Great for “trading up” or “downsizing” from an existing home

• Best of all you’re helping your community

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• May be easier to qualify than “forward” mortgages Minimal credit requirements

Credit scores don’t matter

No income requirements

• Repayment is typically not required until the end of the loan All borrowers pass away

Home is sold

All borrowers move out

How Can Borrowers Benefit?


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• Empty Nester downsizing in retirement

• Relocation

Warm climate

Grandchildren and friends

• Need a single story for physical reasons

• Want to purchase a dream home

• Unable to purchase in the past due to credit/income qualifications

• Need to eliminate burdensome monthly mortgage payments

Who might use a HECM for Purchase?


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Borrower’s Investment

Eligible Funds

• Verification of Deposit• 2 Months bank statements• Gift Funds• Proof of liquidation of retirement assets must be provided prior to close• Deed of Sale

Final HUD-1

Ineligible Funds

• Seller Financing• Personal loans• Cash withdrawal from credit cards• Bridge loan• Gap financing• Subordinate liens• Seller concessions


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70 year old Borrower

4.99% Fixed Rate

Current Home Purchase$600,000 Value $400,000 Value$300,000 Loan Amount $248,000 RM Loan Amount$300,000 Gross Equity $152,000 Down Payment

$36,000 Closing Costs (6%)$264,000 Net Equity

Net Benefit$264,000 Net Equity

$152,000 Down Payment $112,000 Cash Remaining

Selling and Buying


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• 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

How Am I Protected?


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“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

Most Common Reverse Mortgage Misconceptions


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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.

Common Questions and Answers


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Question: “When does the loan have to be repaid?”

Answer: If the borrower moves 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 protect borrowers from receiving incorrect information about reverse mortgages. Counselors will review loan programs, costs and alternative solutions with potential borrowers.

Common Questions and Answers(cont.)


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For more informationplease contact me at:

Questions?

Bob BozanicReverse Mortgage Loan Specialist818-384-8078 CellNMLS# 224391 [email protected]

fha hecm loan for purchase

Documents

reverse mortgage loan

home loan proceeds

loan repayment

location of home loan

loan illustrations

rm loan

reverse mortgage great

loan proceeds available