Reverse Mortgages Explained

Continental Pacific Financial
FHA/HUD Approved Loan Correspondent
©2008 Kenneth L. Kamins

Reverse Mortgage Topic Outline

1. What is a Reverse Mortgage?
2. How can I receive my Reverse Mortgage loan proceeds?
3. How does a Reverse Mortgage work?
4. What are common uses for Reverse Mortgages?
5. What are the typical costs involved?
6. What are my responsibilities as a Homeowner?
7. How am I protected?
8. Most common misconceptions about Reverse Mortgages?
9. Common Questions and Answers about Reverse Mortgages.
10. Questions and/or Comments?

1. What is a Reverse Mortgage?

• Enables homeowners age 62 and older to convert their home equity into income without having to sell the home or give up title
• No required monthly mortgage payments to make while still in the home
• Loan proceeds are tax-free and may be tax-deductible upon loan repayment *
• Reverse mortgages are commonly used to payoff existing mortgages, eliminating the monthly payment obligation

* Consult a Financial Advisor or Tax Advisor for advise on your unique situation.

Back to Previous

2. How can I receive my Reverse Mortgage loan proceeds?

Loan Option	Description
Lump Sum	Immediate disbursement of some or all loan proceeds
Line of Credit	Credit line available for future use
Tenure Monthly Payment	Monthly payments for as long as the homeowner(s) occupy the property
Term Monthly Payment	Monthly payments for a specified number of months
Payment Combination	Create different loan options to suit different borrower needs

* Not all product and loan options are available in all states.

Back to Previous

3. How does a Reverse Mortgage work?

• Loan proceeds available to the borrower are based on two main factors:
  • Age of homeowner(s)
  • Value and location of home
• Loan is repaid at permanent move out, and repayment never exceeds appraised value of the home
• Amount repaid is principal, accrued interest and any financed costs

Back to Previous

4. What are common uses for Reverse Mortgages?

• 67% Hospital/Health Care Costs
• 55% Repay Existing Mortgages
• 50% Reduce Burden on Children
• 50% Home Improvement/Repair
• 38% Pay Property Taxes
• 29% Daily Expenses
• 14% Travel/Something Special
• 3% Gifts

Reverse Mortgages are Great Options for...

• Seniors who do not have enough income to make regular mortgage payments
• Seniors who do not wish to make mortgage payments, or would like to eliminate that monthly payment obligation
• Seniors who could benefit from a stream of income during their retirement years
• Seniors who are finding out that traditional retirement income sources (IRAs, pensions, 401(k)s, Social Security) aren't sufficient to cover everyday living expenses and healthcare needs

Back to Previous

5. What are the typical costs involved?

• Borrowers are responsible for closing costs
• All closing costs can be funded directly through the loan
• Closing costs are similar to those of any other mortgage loan

Typical loan closing costs include:

• Appraisal
• Title search and insurance
• Recording fees
• Other typical and customary closing costs

Back to Previous

6. What are my responsibilities as a Homeowner?

• Keep property taxes current
• Keep Home Owners Insurance current
• Maintain property in reasonable condition

Back to Previous

7. How am I protected?

• Reverse Mortgages are Non-Recourse loans (borrower can never owe more than the appraised value of the home at time of repayment)
• Advance Loan Disclosures and Loan Illustrations are provided at time of application
• Counseling is required for all Reverse Mortgage Applicants - provided by HUD, AARP and other reputable organizations

Back to Previous

8. Most common misconceptions about Reverse Mortgages

"I can be thrown out of my house" or "The Lender will take my home"

FALSE - The homeowner(s) can stay in the home until a loan maturing event occurs. Homeowners retain title to the home throughout the loan.

"I can owe more than my home is worth"

FALSE - The homeowner(s) can never owe more than the appraised value of the home at the time the loan is paid off.

"My heirs will be against it"

FALSE - Experience demonstrates many heirs are generally in favor of Reverse Mortgages, and there are compelling estate planning values to these loans.

Back to Previous

9. Common Questions and Answers about Reverse Mortgages

1. Question: "Are borrowers limited on how they can use the money they receive from a reverse mortgage?"

   Answer: No, the money can be used in any way they like. Common uses are home modifications, healthcare, paying off existing mortgages and supplemental income.

2. Question: "How much money will be owed when the loan has to be repaid?"

   Answer: The total amount borrowed, which includes any accumulated interest, mortgage insurance premiums, financed origination fees and closing costs will be owed at time of repayment.

3. Question: "When does the loan have to be repaid?"

   Answer: If all borrowers move out of the home for more than 12 consecutive months, sells the home or all borrowers on title passes away, the loan must be paid off.

4. Question: "Is it required that borrower receive counseling before getting a reverse mortgage?"

   Answer: Yes, counseling is required to ensure borrowers are receiving correct information about reverse mortgages. Counselors will review loan programs, costs and alternative solutions with potential borrowers.

Back to Previous

10. Questions and/or Comments? For more information please contact us at:

Kenneth L. Kamins
Continental Pacific Financial
4764 Park Granada, Suite 202
Calabasas, CA 91302
800-530-5626

You can also use our convenient secure online contact form or our secure loan application which are available online 24/7/365. We respond promptly to all online requests.

Last modified: 2008-09-27T07:24:06-0700