This is a presentation I have given many times over the years- hope you can learn from it. http://www.yourorlandomortgage.com

1. Reverse
Mortgages

2. What We Will Cover
Today
 What is reverse mortgage?
 Who and what is eligible for a reverse mortgage?
 What types of reverse mortgages are there?
 Counseling Requirement
 Lending Factors
 Current Rates
 Payment Options
 Interest Rate Options
 Closing Costs & Fees
 Facts to Know
 Repayment Requirements
 Reverse Mortgage Examples
 Other options
 Where to go for more information
 Reverse Mortgage Trends
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3. What is a
Reverse Mortgage?
 A special type of home loan that lets a
homeowner convert a portion of the equity in
his or her home in cash.
 The equity built up in the property can be paid
to the owner.
 No repayment is required until the borrower(s)
no longer use the home as their primary
residence.
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4. Who is eligible for a reverse
mortgage?
 Homeowners
 Primary Residence
 62 Years of age or older
 Any debt on home must be included on
new loan
 No subordinate loans allowed
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5. What properties are eligible for a
reverse mortgage?
 Owner-occupied
 Single family homes, two-to-four unit
properties, condominium units, and units in
qualified planned unit developments.
 Properties in trusts and qualified leasehold
estates
 Cooperatives and other properties may only
be available in investor sponsored programs.
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6. What types of reverse mortgages
are there?
 Home Equity Conversion Mortgage (HECM)
 Federally insured product
 Represents 90% of all Reverse mortgage transactions
 Based on FHA loan limits & guidelines.
 Fannie Mae Home Keeper
 Allows higher loan limits than HECM program.
 Home Keeper for Home Purchase
 Allows for purchase of new home with a reverse mortgage.
 Private/Investor Programs
 Allows for higher loan amounts.
 Allows for unusual properties or other situations not typically
allowed by FHA or Fannie Mae.
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7. Counseling Requirement
 As a pre-application requirement, all borrowers are
required to seek counseling from approved agency.
 Face-to-face counseling required from HUD approved
counseling agency
 Face-to-face or telephone counseling allowed through
AARP counselor.
 Given needed certificate upon completion
 Required topics:
 Information on reverse mortgages
 Determines eligibility
 Discusses other options available to assist.
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8. Lending Factors
 Your age
 Appraised home value
 Current interest rates
 Location of your home
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9. Current Rates
Interest Rate = 4.82%
APR = unlike traditional loans, the APR on
Reverse Mortgages can vary greatly and
can, in fact get very high. The APR on
each loan is determined by rate and
repayment time.
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10. Payment options
 Tenure- equal monthly payments as long as at least one
borrower continues to occupy the property as their primary
residence.
 Term- equal monthly payments for a fixed period of months
selected.
 Line of Credit- unscheduled payments or in installments, at
times and in the amounts of the borrower’s choosing until the
line of credit is exhausted.
 Modified Tenure- combination of line of credit with monthly
payments for as long as the borrower remains in the home.
 Modified Term- combination of line of credit with monthly
payments for a fixed period of months selected by the borrower.
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11. Interest Rate Options
 Annually-adjustable rate
 Adjusted yearly based on movement in the one-
year U.S. Treasury Security rate (t-rate)
 Capped at 2% increase/decrease per year and 5%
increase/decrease over the life of the loan
 Monthly-adjustable rate
 Life cap only- 10%
 Allows for higher initial advances
 Most Common choice for HECM.
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12. Closing Costs & Fees
 Origination Fee = 0-2%
 Mortgage Insurance Premium
 2% of loan amount at close
 .5% of loan amount on annual basis
 Normal closing costs- appraisal, title,
document preparation, etc.
 Servicing Set-Aside
 $30-35 per month for life of the loan
 Covers projected costs of servicing
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13. Facts to Know
 No tax implications for cash received.
 No direct implications for social security
or other income related benefits.
 No restrictions on the use of the money.
 Normally closing costs are significantly
greater.
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14. Repayment Requirement
 Death of all borrowers on loan.
 Sale of the property.
 Home is no longer a primary residence.
 Borrower transfers title of the home.
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15. Reverse Mortgage Examples
FHA/HUD Fannie Mae Private/Investor
Monthly HomeKeeper Programs
CASH AVAILABLE
Cash Available Without Liens $93,321 $51,551 $49,861
Cash Available After Paying Off Liens $68,321 $26,551 $24,861
OR MONTHLY INCOME
Monthly Income Without Liens $544 $404 N/A
Monthly Income After Paying Off Liens $399 $208 N/A
Monthly Savings By Paying Off Liens $500 $500 $500
Net Additional Monthly Income $899 $708 $500
OR LINE OF CREDIT
Creditline Available After Paying Off Liens $68,321 $26,551 $24,861
Annualized Growth Rate 5.46% N/A 5.00%
Creditline Value In 5 Years $89,133 $26,551 $31,729
Creditline Value In 10 Years $116,285 $26,551 $40,495
OR ANY COMBINATION OF THE ABOVE
For example: 1/2 Cash Available, 1/4 Monthly Income and 1/4 Line of Credit.
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Assumptions: Age Information: 01/01/1940 Nearest Age: 65

16. Other Options
 Home Equity Line of Credit
 Banks
 Brokerage/investment houses
 Option ARM mortgages
 4 Payment options
 30 Year amortization
 15 Year amortization
 Interest only payment
 Minimum payment (1.0-3.0%)
 Interest Only loans
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17. Where to go for more
information?
 www.aarp.org
 www.reverse.org
 www.reversemortgage.org
 www.hud.gov
 Reverse Mortgage Calculator
 www.financialfreedom.com
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18. Reverse Mortgage Trends
 Federally insured loans increased from less
than 6000 in 2000 to over 38,000
transactions in 2004.
 Represent over $6 billion in volume in 2004.
 90% of all reverse mortgages are part of the
federally insured “HECM” program.
 According to Wall Street Journal 4/26/05
“Tool Designed to Cover Basic Needs is Used
Increasingly for Second Homes and Luxury
Items”
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19. Leading Reverse
Mortgage Lenders
 Look for a professional
 Wells Fargo Mortgage
 www.wellsfargomortgage.com
 IndyMac Bank
 www.indymac.com
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20. Questions?
Thanks for your time
Travis BeMent
Loan Consultant
YourOrlandoMortgage.com
(407) 619-4432
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