Seniors: Double and Triple your money!!!

In Yuma County, call 928 345-1200 about...

Reverse Mortgages for     Home Purchase

    What today’s informed Real Estate Agent needs to know about Reverse Mortgages for seniors, 62 and over.

    A Reverse Mortgage is a non recourse loan that allows homeowners age 62 and older to convert home equity into cash.

     The homeowner or their heirs will never be asked to pay back more than the value of the home, even if the debt has grown to more than the value -- or never in their lifetime if the borrower lives in the home as their primary residence. This is not the case in traditional loans and equity lines. 

     Seniors will never have to leave their home, guaranteed.

     There’s no income, asset or credit qualifications.

     No monthly mortgage payments are required.

     No repayment of the loan until the last borrower permanently moves out.

     Proceeds are tax free. Interest may be deductible upon loan repayment.

     Currently, these loans offer the lowest interest rates and has a maximum lending limit of $417,000.

    Loan proceeds for these loans are available to the borrower and based on three main factors -- The age of the homeowners, value of the home and current interest rates. The loan is repaid at permanent move out, and repayment never exceeds the value of the home. The amount repaid is principal, accrued interest and service fees.

     Seniors receive funds by lump sum at close or as used for purchase of another home. They can receive these funds in a monthly payment (tenure lifetime) or Equity Line. No interest is charged if you don’t use it and is always available to draw on. This growing equity line earns interest at the same rate charged on the principal balance.

TAXES  

     All proceeds from a reverse mortgage are tax free and not considered income.

     If a senior is dependent on the home mortgage interest deduction to keep themselves in a particular tax bracket, they should consult with their tax professional before getting a reverse mortgage.

WHAT IS THE POTENTIAL MARKET?

     There are more than 21 million senior homeowners. Sixty percent of the market is 65-70 years old.

     There is three trillion dollars in home equity to work with.

     The loan volume has increased by 70% per year for the past three years. Fannie Mae study shows a 90% plus level of satisfaction.

USES FOR REVERSE MORTGAGES

     -- Health care costs

     -- Repay existing mortgages

     -- Reduce burden on children

     -- Gifts

     -- Home repair and improvements

     -- Purchase property.

SCENARIO #1

Affording more and staying payment free

     Mary, 88 wants to sell her home and downsize to a 55+ condo. Mary’s home will net her a profit of $205,000. But the condo Mary wants is $240,000, and with closing costs and the upgrades she would like, she’ll need more than $252,000 to buy the new condo. Hence, she is short $47,000 and that assumes she is going to use every cent of her proceeds from the sale of her current home, a scenario with which she is not comfortable.

     So, Mary gets an RM to purchase the new condo. From the sale of her current home, she would like to leave $35,000 of her proceeds in the bank, and use the remaining $170,000 towards the condo purchase. After closing costs, she will have $88,854 available from the RM. Therefore, she will only need to utilize $70,000 of $88,854 available through the RM. The remaining balance of $18,854 will remain available to her as an equity line that she can draw from in the future. No payment is ever required so she is still living payment free, in the condo she wants, with the cash in the bank she needs to feel secure.

     $210,000-$170,000=$70,000. Her upgrades can come from the Credit Line or her savings.

SCENARIO #2

Planning for down payment needs

     Russell and Myra, both 75, own a townhouse to purchase their dreams of living on the coast. But the realtor lists THE PERFECT HOUSE on the coea. The problem is Russell wants to continue to work for the next couple of years and the beach is simply too far away for him to commute.

     Myra calls her mortgage broker and inquires about different ways to finance the beach house without selling her townhouse on which she still owes $115,000 and has a $975 payment. She learns she can do a cash out refi to pull out some down payment, but this increases her payment and still requires Myra to finance a significant amount on the beach house. Or she could try to do 100% financing (All of this she must qualify for on Russell’s part time income and social security). Myra is looking at the proposed mortgage payment on the townhouse AND the beach house, and quickly deciding buying her dream house now was not an option, and she would have to wait a couple of years more when she is ready to sell.

THE SOLUTION

     A RM loan on the townhouse they currently own would allow them to pull $63,788 out in cash, after closing costs AND paying their current mortgage in full. This is more than enough for a 20% down payment and closing costs to purchase the beach home as a second home. By doing this, they eliminate their payment on their existing townhouse ($975) and financed only $180,000 on the beach house, yielding them a payment of $1100 a month. They had no problem qualifying, since their mortgage payment had been eliminated. Russell and Myra went from owning one property for $975 a month to owning two properties for $1100 per month. They spend every weekend at the beach for years, and then 4 years later, call their realtor to list their town house. The sale of the townhouse nets them enough to pay the beach house off and buy a new boat.

SCENARIO #3

MOVE UP

     Bob is single at age 75 and would like to move into Sun City, a retirement development, his current home will net him $150,000 after all closing costs. The new home in Sun City costs $425,000. Bob will be required to put a down payment of $142,333 and the balance will be financed with an RM. Bob moves into a beautiful new home where he has no payments for the rest of his life. Bob also has $7,667 left over to enjoy his days on the golf course.

SCENARIO #4

Stay in their own home.

     Often, seniors are being forced to sell their home for affordability reasons alone. The Reverse Mortgage allows them to stay in their home longer and live a better quality life than they had hoped for. The good will earned by helping people like this get a reverse mortgage is worth a bundle of referrals for realtors who otherwise would advise against it to protect self interest.

NOTICE TO REALTORS

Taking a listing that is encumbered by a reverse mortgage.

     Reverse Mortgages must be paid back within 12 months of the last borrower passing away. It’s important to keep this in mind when coming up with your proposal to market the property. Careful consideration should be made to the time limitation you may have to sell the property. It is also important to remember that the clock starts ticking when the last borrower passes away, NOT when the probate process is finalized. This may further reduce the time you have to sell the poperty.

HOW IS A REVERSE MORTGAGE DIFFERENT THAN A TRADITIONAL LOAN?

     Reverse Mortgage                                  Traditional Loan

     No income verification                                Prove your income

     No assets needed                                         Prove your money

     No credit record needed                             You’d better have credit

     No personal guarantees                              You guarantee the loan

     If property values drop, you don’t pay    If value drops, you pay

     No monthly payments, ever                      You pay and pay

     You don’t pay up front costs                      Get out your checkbook

     No income tax issues                                   Possible tax issues

Consider how you can leverage your money as a senior citizen to purchase a home. As you age, less cash is needed to purchase a home with an increasing percentage of the value in a reverse mortgage requiring no payments in your lifetime.

     In Western Arizona, for information, Call Warren Strycker, Strycker & Associates, 928 345-1200.