The daughter of a potential client of mine asked me today to send her "something that summaries the features and benefits of all of these different reverse mortgage programs". When I finished simplifying and summarizing to send it to her, I thought this would be good to share. So here it is.
I've listed the features below... and the benefits? Increased cash flow and access to funds & all that may bring to the quality of life.
- Live in the home.
- Maintain the home.
- Keep the home insured.
- Keep property taxes and property owners association dues current.
All HECM reverse mortgage products
- No mortgage payments.
- No minimum credit score requirements.
- No income requirement.*
- Non-recourse Loan - Borrower & Heirs protected - Borrower or Estate are not responsible to pay any shortage if home is sold at market value for less than loan balance.
- Loan proceeds are not taxable income.
- No prepayment penalties.
- Up-front Mortgage Insurance Premium
- Monthly Mortgage Insurance of 1.25% of loan amount per annum, accrued monthly.
- Due & payable when the last borrower no longer lives permanently in the home
*Sufficient income to cover the costs of property taxes and hazard insurance are required when obtaining a HECM for Purchase.
- Interest rate is based upon the 1 Mo. LIBOR rate (1MLB)
- Interest rate adjusts monthly.
- Interest rate is capped at 10% over the initial rate.
- FHA Insurance protects the borrower by guaranteeing continuing payments (term or tenure) and credit line availability, including growtheven if lender fails.
- Ability to receive loan proceeds in various ways.
- Tenure (monthly payments for life while in home)
- Term (monthly payments for specific time period)
- Line of Credit with a guaranteed growth rate**
- Lump sum
- Combination of any or all of the above
- Ability to change style of payout even after closing for a $20 recalculation fee)
**Growth rate on Line of Credit is equal to the note rate plus 1.25%, and not dependent upon future home value or income or loan balance.
- Higher loan amount available. (At this time)
- May only receive funds as lump sum.
- Accurate prediction of future balance.
HECM Standard Reverse (fixed or adjustable)
- Highest Loan amounts.
- Up-front Mortgage Insurance Premium is 2% of Home Value.
HECM Saver Reverse (fixed or adjustable)
- Lower Loan amounts (means lower risk for investor)
- Lower Up-front Mortgage Insurance Premium .01% of Home Value
Did I miss anything??
Deborah Nance
Your Local Southern California Reverse Mortgage Professional
Reverse Mortgage is a powerful in you tool kit with the aging population.
Great job on summarizing reverse mortgages, very informative, I am sure your client appreciate the information.
Thanks Lorinda (Love your profile pic!)
Tim, I just read your blog about HAMP... yep... a train wreck.