A Guide to Reverse Mortgages
Dear Friend, When I started BWA Mortgage a little over 30 years ago I did so to help people navigate the sometimes-swirling waters of the home loan process. Since that time, I have been privileged to have personally closed over 3,00 0 home loans. Along that journey I have learned quite a bit, which makes sharing what I have learned a lot of fun (and very rewarding). I hope the information I share today about Reverse Mortgages is helpful to you. Sincerely,
Who May Qualify for a Reverse Mortgage? Individuals 62 and older who own a home. Anyone who falls within these two parameters should at least understand the basics of the Reverse Mortgage Programs to help them decide for themselves if this is the right product for them!
Did You Know? Each borrower is required to complete an Independent Counseling session before they can even apply for a Reverse Mortgage!
Clearing Up Some of the“Mystery” of a Reverse Mortgage IF YOU TAKE A REVERSE MORTGAGE: • The home must be your primary residence. • As long as you pay your taxes, insurance, and comply with the loan terms,
you cannot lose your home under normal circumstances. • If you die, then your heirs would inherit your home and just like any
other type of mortgage that would be on your home, your heirs can pay off the Reverse Mortgage in many ways, including selling the home (and keeping the equity). • There is no pre-payment penalty of any kind so you (or your heirs) can sell
your home without penalty. • You can take a fixed rate loan or an adjustable rate loan.
Some Reverse Mortgages provide a line of credit that can grow over time — these are Home Equity Conversion Mortgages (HECM) and they have a Mortgage Insurance Premium to pay. • You can withdraw funds tax free from a reverse mortgage loan
(consult your CPA). • You must continue to pay your property taxes, HOA dues,
homeowner’s insurance and maintain your home. • You can make payments on your loan if you wish to keep interest
How Much You Can Borrow Depends on Several Factors They include:
Your Age ( The older you are the more you can borrow!) The Value of Your Home The Reverse Mortgage interest rate at the time you get your loan
What’s Unique About the HECM Line of Credit? • The Line of Credit can grow over the life of the loan • The Available Line of Credit grows at your current Interest
Rate +.50% • So if your Available Line of Credit is, say, $200,000 and your current
interest rate is 5%, your line will grow by $11,000 for that year and now you have a $211,000 Line of Credit! • You only pay interest on the amount you actually draw. • Even if home value declines your line can continue to grow!!!
Let Me Repeat Myself • Even if home value declines your line can continue to grow!!! • The funds you draw from the line can be used for any need now
or in the future • The Line of Credit is only available on the Adjustable Rate HECM
loan; it is not available for the Fixed Rate HECM loan.
How a HECM Line of Credit Compares to a Traditional Home Equity Line of Credit (HELOC) Traditional Home Equity Line of Credit • You must qualify for the line. • You must make minimum monthly
payments • Line can be cut off or reduced at the
whim of the lender (think 2008). • After 10 years the line is closed (you
no longer have access to funds).
HECM Reverse Mortgage Line of Credit • Qualifying is different from a
Traditional Home Equity Line of Credit in many ways. • There are no monthly payments you
need to make. • Line will not be closed or cancelled
by the lender as long as you continue to meet all your normal
• And you must start to make principal
and interest payments. • Lifetime interest rate caps typically in
the 18% to 21% range.
Reverse Mortgage commitments (for example, you must continue to maintain your home and the home must continue to be your primary residence, among other things) • Lifetime rate caps are 5% over the
starting interest rate.
We’re Changing Lives! THE CHALLENGE • 75-year-old, retired, single woman. • Money in the bank (everything) ~ less than $5,000. • Only income, $1,400 per month in Social Security. • Still owes a $150,000 mortgage with payments of $850 per month.
O U R S OLU T ION • We arranged a Reverse Mortgage loan. • Paid off her existing mortgage and eliminated that monthly payment. • Provided her with an additional $1,000 per month disbursement from the
new Reverse Mortgage loan.
THE CHALLENGE • 87-year-old recently widowed gentleman. • Money in the bank (everything) ~ $40,000 • Only income, $1,300 per month in Social Security. • Still owes a $525,000 mortgage with payments of $2,786 per month. • Home valued at $1.6M.
O U R S OLU T ION • We arranged a Fixed-Rate Jumbo Reverse Mortgage loan and eliminated
his $2,786 monthly mortgage payment. • He also received $250,000 in cash that he put in the bank.
THE CHALLENGE • 66-year-old retired, single woman, taking care of her 90-year-old mother. • Money in the bank (everything) ~ $3,000. • Only income $1,160 per month Social Security and a little SSI money
for her mother. • Still owes $230,000 mortgage with payments of $1,400 plus
HOA payments of $298 per month • Condo valued at $540,000.
O UR S OLU T ION • We arranged a HECM Reverse Mortgage loan and paid off her
These Are All True Stories!
The results shown are based on specific circumstances. Results may vary based on individual situation and are not guaranteed.
10,000 S E N I O R S T U R N 6 5 E V E R Y D AY !
Did You Know? You can use a reverse mortgage to purchase a home!
REVERSE MORTGAGE PURCHASE SUCCESS STORY! • 90-year-old husband with his 75-year-old wife. • The home they live in is valued at $1M plus. • They currently have a $600,000 mortgage with payments of $3,000
per month. • Income is Social Security for each of them. • He wants to be sure she is well cared for long after he passes on and
he does not want her burdened with the $3,000 per month, especially because when he passes she will no longer receive his social security income so her income will decrease significantly. • They are going to sell their current home and net approximately $350,000. • They will then purchase a smaller home in the $600,000 price range, put
50% down and take a Reverse Mortgage on the new home. • She will have no mortgage payments to make on the new home saving
them $3,000 per month and they will have $50,000 left over to add to their small savings account. • As an added bonus, they should be able to take their $100 per month
property tax basis with them to their new home.
Please don’t ever hesitate to give me a call, I am ready to answer all of your questions.
Floyd Walters floyd @ bwamortgage.com 818 952-2726
NMLS# 334184 CA LIC ID# 01174621
© BWA Mortgage 2020. 707 Foothill Blvd. #202, La Cañada, CA 91011 These materials are not from HUD or FHA and were not approved by HUD or a government agency.