Anatomy of a Reverse Mortgage

The Anatomy of a %24 REVERSE MORTGAGE HECM A reverse mortgage is a form of equity release (or lifetime mortgage) available in the United States. It is a loan available to seniors aged 62 or older, under a Federal program administered by HUD. What is a HECM? O Most widely available type of reverse mortgage is the federally insured Home Equity Conversion Mortgage (HECM). Payments are made by the lender to the borrower. Borrower Requirements 1. 62 years or older 2. Property must be your principal residence 3. Complete a consumer information session from a HUD approved HECM counselor 4. No credit qualification or income qualification Property Requirements 1. Single family home or 2-4 unit home with one unit occupied by the borrower 2. HUD-approved condominium project 3. Manufactured home that meets FHA requirements How Much Can You Borrow? $4 Assuming there is no mortgage on the property, 4 factors determine the amount one can borrow: 1. The property value 2. Age of the youngest borrower will determine the amount one can borrow. 3. Lesser of appraised value or the HECM FHA mortgage limit of $625,500 4. Current interest rate Example Scenarios Age Property Value Amount Available to Borrow $. 2$ 62 + $ 300,000 $ 177,495.00 74 + $ $ 300,000 $ 198,495.00 84 + $ 300,000 = $ 214,095.00 62 + $ 400,000 = $ 241,195.00 74 + $ 400,000 $ 265,195.00 = 84 + $ 400,000 $ 285,995.00 * Amounts shown above are estimates and based on market rates on May 17, 2012. Amounts may vary slightly depending on property value, mortgage rates, property location and specific lender. Payment Options * Some lenders allow payment options changes for a fee Tenure 8 Term 8 Equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence. Equal monthly payments for a fixed period of months selected. Line of Credit U, Modified Tenure 8. Unscheduled payments or in installments, at times and in an amount of your Combination of line of credit and scheduled monthly payments for as long as you remain in the home. choosing until the line of credit is exhausted. Modified Term Combination of line of credit plus monthly payments for a fixed period of months selected by the borrower. 8. Fees Initial mortgage insurance premiums Annual mortgage insurance premiums Third party charges 2% of the lesser of the appraised value of your home, the FHA HECM mortgage limit of $625,500 or the sales price. Charged an annual MIP that equals 1.75% of the mortgage balance. Appraisals, title searches, surveys, inspections, recording fees, government mortgage taxes. %24 Origination fee Interest Servicing fees Fee charged by the lender to process the reverse mortgage. The fee will be a minimum of $2,500 to a maximum of $6,000. Adjustable (annual or monthly adjusting) and fixed-rate options are available. Adjustable rates cannot change more than 5% over the lifetime of the loạn. Lenders or their agents provide servicing throughout the life of the HECM. The charge is typically no more than $50/monthly. Sources: INFOGRAPHIC BROUGHT TO YOU BY http://en.wikipedia.org/wiki/Reverse_mortgage http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/hecm/hecmabou ReverseMortgageCompanies.com