Caregivers Guide to Reverse Mortgages

Caregivers Guide to Reverse Mortgages

G E T T I NG R E A L A BOU T R E V E R S E MOR T GAG E S : WHA T T O E X P E C T — AND HOW T O MA K E S U R E MOM AND DAD A R E P RO T E C T E D

W H A T L A T E R C A R E G I V E R S ' G U I D E T O R E T I R E M E N T A D U L T C H I L D R E N N E E D T O K N O W N O W &

CONT ENTS

02

INTRODUCTION

05

REVERSE MORTGAGES: THE BASICS

Requirements , advantages and disadvantages

08

DECISIONS, DECISIONS

What to expect from the process

Rights and responsibilities

Common misconceptions

Borrower ' s safety net

WHAT'S THEIRS AND WHAT'S LEFT FOR HEIRS

12

15

ABOUT REVERSE MORTGAGE FUNDING

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I N T RODUC T I ON

You ’ ve heard of Baby Boomers , but are you familiar with the Sandwich Generation ? If you ’ re a 40 - or 50 - something this term may describe you . The sandwich generation refers to middle - aged adults who are deferring their own financial planning to support their young adult children and aging parents . They ’ re caught in the middle of making sure their parents have enough money to live a comfortable retirement , all while helping their children pay rent or student loans , or allowing them to move back home after college .

It ’ s hard not to feel the financial and emotional squeeze — especially when it comes to your aging parents . Between the costs of housing and medical expenses , it can be a struggle for them to manage their finances on a fixed income , leaving you concerned about their retirement planning , as well as your own . If your parents don ’ t have the means to sustain their current lifestyle without your assistance , and want to continue living in their home , a reverse mortgage — home equity conversion mortgage ( HECM ) and proprietary reverse mortgages — is a financial product that can help them stay put and live off their equity for years to come .*

Sound familiar ?

*As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, and maintenance.

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The terms of RMF ' s Equity Elite reverse mortgage are changing , allowing eligible homeowners as young as 55 to qualify in selected states , so it might even be an option for you down the road . This valuable financial tool can help you leverage the equity you ’ ve built up in your home , so you can preserve , with more likelihood , the interest - earning assets you ’ ve been growing for your own retirement .* # To see whether a reverse mortgage is a viable option for you or your loved ones , ask your financial planner sooner rather than later . Read on to learn more so you can make the most of that conversation .

Myth

I won ' t be able to inherit my parents ' home .

Fact

Heirs will still inherit the home . If heirs choose to keep the home , they will have to pay back the loan balance plus accured interest and fees . Or , they can sell the home to repay the loan . Once the loan is repaid , any remaining equity is theirs to keep .

*As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, and maintenance. #Available to borrowers as young as 55 in select states only. Higher minimum age requirements may apply. Visit www.reversefunding.com/equity-elite for details.

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"OUR AGENT WAS EXCEPT I ONAL I N HE LP I NG US THROUGH THE APPL I CAT I ON PROCESS AND

FOL LOW UP DE TA I LS THROUGH CLOS I NG . "

- J O H N

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R E V E R S E MOR T GAG E S : T HE BA S I C S R e q u i r eme n t s , a d v a n t a g e s a n d d i s a d v a n t a g e s

A reverse mortgage can be a smart financing option for older homeowners . As with any financial decision , it ’ s important to do your homework up front and understand all the nuances of how they work .

First and foremost , your parents must meet these minimum eligibility requirements to be considered :

#

At least one parent is age 55 or older There ’ s substantial equity in the home ( at least 50 %) The house remains their principal residence

#Available to borrowers as young as 55 in select states only. Higher minimum age requirements may apply. Visit www.reversefunding.com/equity-elite for details.

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T HE BA S I C S S ome a d v a n t a g e s o f r e v e r s e mo r t g a g e s

As a home - secured loan , a reverse mortgage allows homeowners to harness their home ’ s equity , all while living in it and retaining ownership . As borrowers , your parents can use the funds as they wish : for supplemental funds or to cover travel costs , medical bills , home renovations and even home health care .

The loan is customizable , meaning your parents choose how to receive their funds . The equity is available as a lump sum , monthly payments or a line of credit that ’ s waiting when they need it .**

THERE ' S A B I G D I FFERENCE BETWEEN S IMPLY BE I NG A TOUR I ST AND BE I NG A TRUE WORLD TRAVELER

A reverse mortgage offers benefits of a traditional line of credit that you can get from a bank , but with additional benefits — including a flexible repayment feature . With this option and no pre - defined maturity date , your parents can decide how much or how little they want to pay each month toward the loan principal and interest . Or they can choose to make no monthly loan payment at all .

As long as they keep current on loan obligations , including property taxes , homeowners ’ insurance and basic home maintenance , you parents can continue to live in and own their home for the rest of their lives .

**Borrowers who elect a fixed rate loan will receive a single disbursement lump sum payment. Other payment options are available only for adjustable rate mortgages.

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T HE BA S I C S T h e d i s a d v a n t a g e s o f r e v e r s e mo r t g a g e

While a reverse mortgage is a great option for the right borrowers , there may be downsides that your parents haven ’ t considered .

They want to move in a few years . As with any loan , there are upfront costs , so make sure they crunch the numbers to see if it ’ s financially worthwhile to take out a reverse mortgage if they plan to move . They might want to consider the benefits of a HECM for Purchase loan — which can make it easier for them to afford the home they really want in retirement . They own a higher - value home and can ’ t access enough equity . With any reverse mortgage , the borrowing limit depends on several factors , including home value . If your parents live in a home worth over $ 820 , 000 , for example , a reverse mortgage ’ s limitations on how much can be borrowed might not give them the funds they ’ re looking for . However , RMF ’ s Equity Elite product may help close the equity gap . They ’ re already having a hard time paying basic home bills . There ’ s no escaping bills when you own a home . Reverse mortgage loan obligations include keeping current with property taxes and insurance , as well as basic home maintenance . If there ’ s a homeowners association fee , borrowers must continue paying that as well . They want to build up their equity . With a traditional mortgage , borrowers build equity as they pay down the loan . With a reverse mortgage , home equity decreases if borrowers choose to defer repayment by not making monthly principal and interest payments ; that ’ s because the loan balance increases over time due to interest .

" GREAT SERV I CE . VERY PROFESS I ONAL AND FR I ENDLY . " - R I CHARD H

Like any big financial decision , you don ’ t want to write it off ( or jump the gun for that matter ) before carefully considering all the facts .

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DE C I S I ON S , DE C I S I ON S Wh a t t o e x p e c t d u r i n g t h e r e v e r s e mo r t g a g e p r o c e s s

There ’ s no universal mortgage solution for everyone , but a reverse mortgage loan can be a lifesaver for the right borrower . As your parents weigh the pros and cons , be prepared to give them your best advice and support .

From how much they ’ re eligible to receive to loan requirements , disbursement of funds and possible implications for their government benefits , there ’ s a lot of ground to cover . A reverse mortgage specialist from Reverse Mortgage Funding ( RMF ) will walk your loved ones through the process .

R i g h t s a n d r e s p o n s i b i l i t i e s u n d e r t h e l o a n

Reverse mortgage borrowers have three main responsibilities to keep their loan in good standing . If your parents ever fail to meet these requirements , they may risk losing their home to foreclosure .

Borrowers are required to pay property charges , such as property taxes and insurance . Your parents must pay these bills on time , every time . If applicable , homeowners ’ association fees and flood insurance must also be paid . The home must be kept in good repair . Once the loan closes , your parents are obligated to keep up with basic home maintenance . Beware of contractors that may try to pressure them into unnecessary repairs when they learn there ’ s a reverse mortgage involved .

The home must be the borrowers ’ principal residence . Every year , your parents will have to certify in writing that they occupy the home as their principal residence .

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DE C I S I ON S , DE C I S I ON S

Here ’ s a brief overview to get started :

FHA counseling. Prospective borrowers must complete mandatory counseling with a licensed HUD counselor . During the session , they ’ ll review the homeowners ’ budget , income , debts , cash flow , monthly expenses and more to determine if they should proceed . Application. The reverse mortgage application process is similar to that of a traditional mortgage . A reverse mortgage specialist will assist the homeowner in completing and collecting the necessary documentation .

1 2 3 4 5 6

Appraisal. This step assigns value to the home , which directly impacts the borrowing amount . It also ensures that the home meets HUD ’ s minimum property standards .

Underwriting. Once the appraisal is received , the loan file will be reviewed by an underwriter . The underwriting process determines that all requirements have been met based on the submitted documentation . Closing. When the loan is deemed clear to close , the homeowner will receive their closing documents . An attorney or closing agent must review the documents before the homeowners officially sign off on the loan .

Funding. This is the step where borrowers decide how they want to receive their funds . Funds are generally disbursed within three business days of signing the loan documents .

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DE C I S I ON S , DE C I S I ON S C l e a r i n g u p c ommo n m i s c o n c e p t i o n s

Having access to the facts can help you and your parents evaluate if a reverse mortgage is a sound choice . Unfortunately , there ’ s a lot of misinformation floating around . Let ’ s clear up the confusion .

REVERSE MORTGAGES TAKE ADVANTAGE OF RETIREES. Nope ! They ’ re designed to help retirees . Many people are living longer , and they ’ re rightfully concerned about outliving their retirement savings . The ability to leverage home equity can provide your parents with a sense of security and financial support . YOU CAN’T QUALIFY IF YOU ALREADY HAVE A MORTGAGE. You absolutely can — it just depends on how much equity your parents have in the home . If they have sufficient equity to qualify , proceeds from the reverse mortgage would first be used to pay off any existing mortgage ( s ). In other words , the balance of their existing loan will be refinanced by the reverse mortgage . IT WILL INTERFERE WITH SOCIAL SECURITY. The funds from a reverse mortgage generally do not affect regular Social Security or Medicare benefits . However , needs - based benefits , such as Supplemental Security Income or Medicaid , may be affected . Consult with a financial professional about your individual situation . Visit www . ssa . gov . THE BANK OWNS YOUR HOME. False . As with any mortgage , the borrower holds the title to the home . Of course , your parents must continue to meet the loan obligations : keeping current with property taxes , homeowners ’ insurance , and maintenance etc . IT’S A LOAN OF LAST RESORT. On the contrary , recent product advances have made reverse mortgages more attractive . The product ’ s versatility and flexibility actually serve a wide range of borrowers , from those of modest means to affluent homeowners and homebuyers .

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DE C I S I ON S , DE C I S I ON S C l e a r i n g u p c ommo n m i s c o n c e p t i o n s

Now that we tackled the myths , it ’ s important to know that reverse mortgages also include built - in consumer protections to help put your parent ’ s minds ( and your own ) at ease :

Mandatory loan counseling by an FHA- approved counselor. As previously mentioned , each potential borrower must meet with an independent , FHA - approved counselor to objectively ensure that they understand the reverse mortgage process , what it entails and the individual terms of the loan . Non-recourse feature. With an HECM or Equity Elite reverse mortgage , your parents ( or their heirs ) will not owe more than the home is worth when the loan is repaid .

Borrowing limits. HECMs have limitations on the amount of available funds a borrower can take at closing and in the first 12 months of the loan . This is to help your parent ’ s home equity last longer than they ever imagined it would . Financial assessment. Lenders are required to conduct a financial assessment to ensure the borrower has adequate cash flow to meet their loan obligations — such as keeping current with property taxes , insurance and maintenance — over the life of the loan .

Since its introduction in 1961 , the reverse mortgage has developed into an important loan option that has now been used by more than a million households .

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WHA T ’ S T HE I R S AND WHA T ’ S L E F T F OR HE I R S ? E n j o y i n g t h e l i f e s t y l e t h e y ’ v e wo r k e d s o h a r d t o a c h i e v e

Many older homeowners choose to live frugally , so they can leave their house to their children . While having an “ inheritance ” may be nice , most adults would prefer their parents live safely and comfortably without having to worry about mortgage payments . A reverse mortgage can give them this freedom .

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WHA T ’ S T HE I R S AND WHA T ’ S L E F T F OR HE I R S ? E n j o y i n g t h e l i f e s t y l e t h e y ’ v e wo r k e d s o h a r d t o a c h i e v e

If you ’ re named an heir , you ’ ll still inherit your parents ’ home . Keep in mind , the loan is considered payable and due when a borrower and , if applicable , eligible non - borrowing spouse passes away . The lender doesn ’ t own the property , so the lending institution can ’ t immediately step in and sell the house . What happens next is up to you . If you want to keep the home , you ’ ll have to pay back the loan balance first . This includes the amount of funds used , plus accrued interest and fees , which can add up quickly . It may require taking out a new loan to repay the existing home , unless you have the cash available . If you don ’ t want to keep the home , you may sell the home to repay the loan , not owing more than the home is worth at the time of repayment . Any remaining equity would belong to you . You may also wish to walk away from the home , in which case the lender will seize the property by foreclosure , after a designated window of time . REMEMBER , I F THE LOAN BALANCE I S MORE THAN THE APPRA I SED VALUE OF THE HOME AT THE T IME OF REPAYMENT , YOU WI L L NOT HAVE TO PAY THE D I FFERENCE . TH I S I S BECAUSE A REVERSE MORTGAGE I S KNOWN AS A NON - RECOURSE LOAN . Whatever you decide , you ’ ll want to act as quickly as possible . A lender will send you a letter that will typically give you 30 days to decide what to do . From the date of the borrower ' s passing , you ' ll have six months to sell the property or pay off the loan , but only if you provide documentation showing that you have listed the house or been approved for financing , or have funds available within the first 90 days . If those documents are not received timely , the loan may be referred to foreclosure . If you need additional time to sell the home , you may possibly be eligible for two additional 90 day extensions to close , if you continue to supply proof the home is listed .

Until the loan balance is paid off , interest on the balance , mortgage insurance premiums , and fees will continue to accrue and increase the payoff amount . If the lender begins foreclosure , additional costs may accrue on the loan balance .

When it comes to an inheritance and your expectations , have a candid discussion sooner than later .

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ABOUT REVERSE MORTGAGE FUND I NG ( RMF )

Tak i ng t he l ead i n educa t i ng consume r s abou t t he i r r e t i r emen t f und i ng op t i ons

Whe t he r y ou ’ r e c onc e r ned abou t y ou r pa r en t s o r t h i nk i ng abou t how a r e v e r s e mo r t gage ma y be an op t i on f o r y ou , c on t a c t RMF — one o f t he na t i on ’ s l e ad i ng r e v e r s e mo r t gage l ende r s . We o f f e r a w i de r ange o f l o an op t i on s a f t e r r e t i r emen t t o s u i t t he d i v e r s e ne ed s o f o l de r homeowne r s and homebu y e r s . A s a d i r e c t l ende r , we a l s o ha v e c e r t a i n p r i c i ng ad v an t age s and c an pa s s t he s a v i ng s a l ong t o y ou . We know t ha t r e v e r s e mo r t gage s a r en ’ t f o r e v e r y bo r r owe r . Bu t i f y ou r pa r en t s me e t t he e l i g i b i l i t y r equ i r emen t s , i t ’ s wo r t h c on s i de r i ng a s pa r t o f a sma r t r e t i r emen t s t r a t eg y and s e cu r e r e t i r emen t f und i ng . We l o v e t o educ a t e homeowne r s and t he i r f ami l i e s abou t t he r e v e r s e mo r t gage p r o c e s s . G i v e u s a c a l l t oda y a t ( 888 ) 2 7 7 - 1 5 6 7 t o s e t up a c on v en i en t appo i n tmen t w i t h a r e v e r s e mo r t gage s pe c i a l i s t i n y ou r a r e a .

S t a r t t he c on v e r s a t i on now , s o y ou and y ou r pa r en t s c an be be t t e r p r epa r ed f o r t he f u t u r e . We l oo k f o rwa r d t o be i ng a pa r t o f i t .

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* * Th i s ma t e r i a l ha s no t be en r e v i ewed , app r o v ed , o r i s s ued b y HUD , FHA , o r an y go v e r nmen t agenc y . The c ompan y i s no t a f f i l i a t ed w i t h o r a c t i ng on beha l f o f o r a t t he d i r e c t i on o f HUD / FHA o r an y o t he r go v e r nmen t agenc y .

* A s w i t h an y mo r t gage , y ou mu s t me e t y ou r l o an ob l i ga t i on s , k e ep i ng cu r r en t w i t h p r ope r t y t a x e s , i n s u r anc e , and ma i n t enanc e .

# Av a i l ab l e t o bo r r owe r s a s y oung a s 5 5 i n s e l e c t s t a t e s on l y . H i ghe r mi n imum age r equ i r emen t s ma y app l y . V i s i t www . r e v e r s e f und i ng . c om / equ i t y - e l i t e f o r de t a i l s .

Cha r ge s s uch a s an o r i g i na t i on f e e , mo r t gage i n s u r anc e p r emi ums , c l o s i ng c o s t s and / o r s e r v i c i ng f e e s , i f app l i c ab l e , ma y be a s s e s s ed and w i l l be added t o t he l o an ba l anc e . A s l ong a s y ou c omp l y w i t h t he t e rms o f t he l o an , y ou r e t a i n t i t l e un t i l y ou s e l l o r t r an s f e r t he p r ope r t y , and , t he r e f o r e , y ou a r e r e s pon s i b l e f o r pa y i ng p r ope r t y t a x e s , i n s u r anc e and ma i n t enanc e . F a i l i ng t o pa y t he s e amoun t s ma y c au s e t he l o an t o be c ome immed i a t e l y due and / o r s ub j e c t t he p r ope r t y t o a t a x l i en , o t he r encumb r anc e o r f o r e c l o s u r e . The l o an ba l anc e g r ows o v e r t ime , and i n t e r e s t i s added t o t ha t ba l anc e . I n t e r e s t on a r e v e r s e mo r t gage i s no t deduc t i b l e f r om y ou r i nc ome t a x un t i l y ou r epa y a l l o r pa r t o f t he i n t e r e s t on t he l o an . A l t hough t he l o an i s non - r e c ou r s e , a t t he ma t u r i t y o f t he l o an , t he l ende r w i l l ha v e a c l a im aga i n s t y ou r p r ope r t y and y ou o r y ou r he i r s ma y ne ed t o s e l l t he p r ope r t y i n o r de r t o r epa y t he l o an , o r u s e o t he r a s s e t s t o r epa y t he l o an i n o r de r t o r e t a i n t he p r ope r t y . © 202 1 Re v e r s e Mo r t gage Fund i ng L LC , 1 4 5 5 B r o ad S t r e e t , 2nd F l oo r , B l oomf i e l d , NJ 07003 , 1 - 888 - 4 9 4 - 0882 . Compan y NML S I D : # 1 0 1 99 4 1 . F o r l i c en s i ng i n f o rma t i on , go t o : www . nml s c on s ume r a c c e s s . o r g . A r i z ona Mo r t gage Bank e r L i c en s e # 09 2 7 682 ; L i c en s ed b y t he Depa r tmen t o f F i nanc i a l P r o t e c t i on and I nno v a t i on unde r t he Ca l i f o r n i a Re s i den t i a l Mo r t gage L end i ng Ac t ; L o an s made o r a r r anged pu r s uan t t o a Ca l i f o r n i a F i nanc i ng L aw l i c en s e ; Geo r g i a Mo r t gage L ende r L i c en s e e # 3 6 7 9 3 ; Ma s s a chu s e t t s Mo r t gage L ende r L i c en s e # ML 1 0 1 99 4 1 ; L i c en s ed b y t he New J e r s e y Depa r tmen t o f Bank i ng & I n s u r anc e ; L i c en s ed Mo r t gage Bank e r - NYS Depa r tmen t o f F i nanc i a l Se r v i c e s - i n - s t a t e b r anch add r e s s 700 Co r po r a t e B l v d , Newbu r gh , NY 1 2 5 50 ; Rhode I s l and L i c en s ed L ende r . F o r Ca l i f o r n i a c on s ume r s : F o r i n f o rma t i on abou t ou r p r i v a c y p r a c t i c e s , p l e a s e v i s i t h t t p s : / / www . r e v e r s e f und i ng . c om / p r i v a c y . No t a l l p r oduc t s and op t i on s a r e a v a i l ab l e i n a l l s t a t e s . T e rms s ub j e c t t o change w i t hou t no t i c e . Ce r t a i n c ond i t i on s and f e e s app l y . Th i s i s no t a l o an c ommi tmen t . A l l l o an s s ub j e c t t o app r o v a l .

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