How to Help Your Clients Finance Healthcare

GROWING OLDER AT HOME: How to Help Your Clients Finance Aging in Place

RETIREMENT HEALTHCARE COSTS: Rethinking long-term care alternatives

With the ongoing spotlight on the national healthcare system, many older Americans are considering long-term care options beyond traditional facilities to allow them to age in place safely. Including these considerations in your financial planning discussions is vital for clients who may not have the income or investment savings to pay for any necessary in-home health services, including: n Personal care at home on a short or long-term basis n Home modifications for safety and accessibility n Durable medical equipment

n Vehicle modifications for the mobility impaired

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75% of adults age 50+ want to remain in their home through retirement.

Source: AARP, 2018 Home and Community Preferences Survey

Your older clients may prefer the advantages of remaining in a familiar environment and having the care come to them as needed, as they age—whether that’s a certified nursing aide, home visits from a nurse, or support with their activities of daily living—instead of moving to a conventional assisted living facility or nursing home. If your clients are re-examining their long-term healthcare plans in light of the ongoing pandemic, they’ll be looking to you to understand their financial options and help them to make informed choices. In addition to personal savings and investments, the equity in their home is also an asset for your clients to use in order to create more liquidity and financial flexibility. Today’s federally-insured* and proprietary reverse mortgages offer targeted strategies for using home equity to fund in-home care. This guide examines how a reverse mortgage may help your clients harness the power of their home equity to fund their retirement—including their current and future healthcare needs.

THE RIGHT TOOL AT THE RIGHT TIME

The economic fallout of the coronavirus pandemic— job loss, volatile financial markets and low interest rates—has left many people feeling financially insecure. A reverse mortgage allows older homeowners to tap into the equity they’ve built through homeownership. Funds can be taken in a lump sum, as monthly payments or as a line of credit that’s there when they need it.*

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Including home equity in your clients’ financial strategies can be advantageous for several reasons: A flexible repayment feature allows more freedom and control in managing monthly expenses. Borrowers can pay as much or as little as they like toward principal and interest each month or make no monthly loan payment at all. They can pay down the loan at any time to reduce accrual of interest, or defer repayment, it’s really up to them. As with any mortgage, borrowers must meet their loan obligations, keeping current with property taxes, insurance and maintenance.

The total balance doesn’t have to be repaid until the last surviving borrower passes away or moves out. This is typically done with proceeds from the sale of the home, but borrowers or their heirs can choose to repay the loan with other assets. The unused portion of the flexible line of credit grows over time—independent of home value. As illustrated below, the earlier a reverse mortgage line of credit is established and the less that’s taken out up front, the more funds they’ll have in the future. 1 This allows borrowers to plan ahead and ensure they have access to necessary funds for in-home care.

$ $ $

EXAMPLE: Meet the Clarks, age 62 The Clarks, both 62 years old, have a home worth $350,000. They choose to put a HECM credit line in place starting at $169,601 . If left untouched for 30 years, the available credit line would grow to $451,364 . †

At that time, the Clarks can draw the entire credit line or a portion of it, regardless of their home’s value. Putting a HECM line of credit into place at 62 years old allows for income-tax-free ‡ funds to be available in various situations throughout retirement, be it an unforeseen healthcare expense or the unexpected death of a spouse.

$451,364 $332,064 $229,803 $169,601

62

72

82

92

*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. 1 If part of their loan is held in a line of credit upon which they may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on their loan. † Not available in all states. Certain conditions and fees apply. Information shown for illustrative purposes only. Assumptions are: (1) 62-year-old borrower; (2) FL home valued at $350,000; (3) LOC will grow at .5% above the interest rate for an Adjustable Rate Mortgage (ARM), which uses the 1-Year LIBOR plus a margin of 2.250%. The initial interest rate is 2.730% which can change annually. There is a 2% annual interest cap, and a 5% lifetime interest cap over the initial interest rate. Maximum interest rate is 7.730%; (4) the growth rate remains at 3.23%; (5) Annual Percentage Rate (APR) is 2.730%. Maximum Annual Percentage Rate (APR) is 7.730%; (6) there are no draws taken from the line of credit by the borrower. Borrower pays down any accumulated interest annually. Rates and funds available may change daily without notice. (7) Client pays $19,427 at closing. ‡ Not tax advice. Consult a tax professional.

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Reverse mortgage funds are a flexible, appealing alternative to traditional forward loans because they can be used on an as-needed basis with no limitations. Unlike Medicare supplemental insurance, there are no worries about what’s covered and what isn’t, and there are no restrictions on the amount of services provided to borrowers: BUILDING BLOCKS FOR HOME CARE FUNDING

n Preparing meals n House cleaning n  Dressing, bathing and grooming assistance

n Transportation n Managing daily medications n Companionship

There’s also no need for your clients to spend down their savings or draw upon invested assets to maintain their lifestyle, even through changes in their health status.

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For us, it was a security blanket. The value of our house was to fund our long-term healthcare. Greg & Katie, RMF customers since 2017

A reverse mortgage also has advantages when compared to a traditional Home Equity Line of Credit (HELOC):

YES NO YES NO* YES † NO HELOC Reverse Mortgage Loan

Must make monthly payments Unused portion grows Limits available monthly cash flow

*As with any mortgage, borrowers must meet their loan obligations, keeping current with property taxes, insurance and maintenance. † If part of your loan is held in a line of credit upon which you may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on your loan.

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While there are a variety of ways to utilize home equity as part of a retirement income plan, reverse mortgages deserve special attention and consideration . † Jamie Hopkins, Director of Retirement Research, Carson Group

Reverse Mortgage Funding LLC (RMF) is dedicated to helping older Americans live the retirement lifestyle that they imagined and deserve. We’re proud to be one of the nation’s top reverse mortgage direct lenders, servicing more than 84,000 reverse mortgage borrowers. RMF is a wholly owned subsidiary of Reverse Mortgage Investment Trust Inc. (RMIT), a specialty finance company in the reverse mortgage sector. Pending regulatory approval in 2020, RMIT will become part of the Starwood Capital Group, a global private investment firm and an innovator in non-agency mortgages. This relationship will afford RMF the unique ability to develop new product lines and create strategic partnerships within the Starwood family of companies.

For more information on helping your clients age in place, contact us at 844.804.3863 or [email protected]

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*This material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency. † Hopkins, Jamie, “Reverse Mortgages Can Be A Retiree’s Saving Grace”, Forbes , October 7, 2015 98% Customer Satisfaction rating as of January 2020. Trustpilot and LendingTree ratings as of May 2020. Better Business Bureau, July 2020. NOT FOR CONSUMER USE. ©2020 Reverse Mortgage Funding LLC, 1455 Broad Street, 2nd Floor, Bloomfield, NJ 07003, 1-888-494-0882. Company NMLS ID: #1019941. For licensing information, go to: www.nmlsconsumeraccess.org. Arizona Mortgage Banker License #0927682; Licensed by the Department of Business Oversight under the California Residential Mortgage Lending Act; Loans made or arranged pursuant to a California Financing Law license; Georgia Mortgage Lender Licensee #36793; Massachusetts Mortgage Lender License #ML1019941; Licensed by the New Jersey Department of Banking & Insurance; Licensed Mortgage Banker-NYS

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Department of Financial Services -in-state branch address 700 Corporate Blvd, Newburgh, NY 12550; Rhode Island Licensed Lender; Texas Mortgage Banker Registration in-state branch address 6044 Gateway East, Suite 236, El Paso, TX 79905. For California consumers: For information about our privacy practices, please visit https://www.reversefunding.com/privacy. Not all products and options are available in all states. Terms subject to change without notice. Certain conditions and fees apply. This is not a loan commitment. All loans subject to approval. L3476-Exp082021