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BASICS IN REVERSE MORTGAGES

BASICS IN REVERSE MORTGAGES. Gaetan Chevalier, Reverse Mortgage Specialist, UniTrust Mortgage Inc. What is a Reverse Mortgage?. Reverse Mortgages are non-recourse loans that allow senior homeowners age 62 and older to convert home equity into cash. Without leaving their homes

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BASICS IN REVERSE MORTGAGES

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  1. BASICS IN REVERSE MORTGAGES Gaetan Chevalier, Reverse Mortgage Specialist, UniTrust Mortgage Inc.

  2. What is a Reverse Mortgage? Reverse Mortgages are non-recourse loans that allow senior homeowners age 62 and older to convert home equity into cash. • Without leaving their homes • Without income or credit to qualify (review for federal liens) • Without having to make any monthly mortgage payments • Without having to repay the loan until they move out permanently, sell the house or upon death • No income, employment, medical or credit score qualification required

  3. How Does a Reverse Mortgage Work? • Loan proceeds available to the borrower are based on a number of factors: • Age of homeowner(s) • Value of home • Location of the home • Interest rate • Proceeds available as lump sum, monthly payout, or line of credit option (growth rate) or combination • Loan never exceeds value of home • Proceeds received can be tax-free income (consult tax advisor) • Amount repaid is principal plus accrued interest, servicing fees and mortgage insurance premium (MIP) • Third Party Counseling Session Required

  4. Product Comparison

  5. HECM HomeKeeper Cash Account Eligible Property Types Single Family Home No New Construction 1 - 4 Units PUD Condo - FHA or Spot Approval Single Family Home New Construction No Multi Units PUD Condo – Spot Approval Single Family Home New Construction 1 - 4 Units PUD Condo – Spot Approval COOP (NY Only)

  6. Common Misconceptions • “The lender takes the house” • Homeowner retains full ownership • Lender has a mortgage on the property • “I can be thrown out of my home” • Homeowner can stay in home for as long as he/she chooses and complies with loan terms • “I can owe more than my home is worth” • Homeowner can never owe more than value of home • “My heirs will be against it” • Once they understand how much they can help their parents, experience demonstrates that many heirs are strongly in favor of reverse mortgages

  7. When the Loan is Due and Payable • Due and payable when last remaining borrower: • Sells home • Passes Away • Permanently leaves primary residence • What is due? • The amount paid out to the borrower, plus the amount paid on behalf of the borrower (MIP) , plus interest and servicing fees • Most lenders expects repayment within 12 months • Heirs or estate responsible for satisfying loan • Refinance • Other Assets • Life Insurance • Remaining Equity, if any, goes to estate or remaining heirs • Heirs / relatives not responsible for shortfall (non-recourse)

  8. The Potential Market • 30+ million senior homeowners • 60% of market is 65 – 70; Huge demographic wave underway • 85% want to remain in home (AARP study) • $3 trillion in home equity held by seniors • Loan volume has increased by 70% per year for the past two years • 100% growth in industry in past 12 months • Fannie Mae studies show 90+% satisfaction rate

  9. Potential Uses of Reverse Mortgages • Help clients maintain independence • Estate and retirement planning • Supplemental income for personal use • Funding college education for grandchildren • Healthcare and hospital costs • Purchase of life or long term care insurance • Home improvement

  10. More Products Will Be Added • Starting age: 60 • Second Homes • Fixed products with more flexibility • More proprietary products = more choices • RM Alternatives: • Equity Key • REX • Insurance

  11. Home Equity Conversion Mortgage (HECM)Sample Scenario • Age: 75 year old couple • Home Value: $450,000 • Lending Limit: $294,500 • Available Principal Limit (Loan Amount):$186,554.24 • Costs(subtracted from Avail. Principal Limit): • Mortgage Insurance Premium: $5,890.00 • Origination Fee: $5,890.00 • GFE Financed Costs: $5,717.88 Total:$17,497.88 • Net available to Client: $169,056.36* • Why so High? • No initial out-of-pocket expense to borrower • No ongoing payment back to RM Lender (lender takes risk) • Required and standard industry fees *Assumes there are no other existing liens against property.

  12. Cash Account Advantage Sample Scenario • Age: 75 year old couple • Home Value: $800,000 • Lending Limit: None • Available Principal Limit (Loan Amount): $336,000 • Costs (subtracted from Avail. Principal Limit): • Origination Fee: $6,720.00 • Other Financed Costs: $3,369.80 • Total:$10,089.80 • Net available to Client: $325,910.20* • Why so High? • No initial out-of-pocket expense to borrower • No ongoing payment back to RM Lender (lender takes risk) • Required and standard industry fees • BUT: • Can choose other plan options which will waive origination fee and / or the Other Financed Costs • *Assumes there are no other existing liens against property.

  13. Who to contact with Questions • Gaetan Chevalier • Reverse Mortgage Specialist • Office: 858-404-7300 x131 • Cell: 760-815-9271 • gchevalier@unitrustmortgage.com

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