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What are the implications of FINANCIAL PLANNING?

 

Reverse Mortgage Myth

There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.

False.

Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD).  This educational session helps them make the right decision for their unique situations.

In This Article We Will Discuss…

What are the implications of FINANCIAL PLANNING?

wht are the implications of financial planningFinancial planners, estate planners, CPAs, advisors, and other professionals are recognizing that getting a Mortgage EARLY creates potential income later in retirement. The basic idea is that growing line of credit (LOC) is not taxable in its growth, and is a secure pool of funds that can serve as an additional source of retirement funds when needed.

It is a type of diversification for a homeowner to use home equity as part of a comprehensive financial planning strategy. For instance, if the home value falls, an established LOC will keep growing notwithstanding. Therefore, the HECM can serve as a form of insurance against decreasing values of home.

Moreover, the subsequent larger LOC can be changed to monthly term payment or tenure at any time. As the LOC increases, and the homeowner grows older, changing the LOC to monthly term payments or tenure gets more appealing. This results from the fact that larger cash amounts will be spread on shorter expected time periods. Therefore, the HECM can serve as a form of protection against future cash flow challenges in the future.

Whay are the Financial Implications of Financial Planning on the childern?

Reverse Mortgage Myth

The borrowers’ children will be responsible for the repayment of the loan.

False.

Reverse mortgages are non-recourse loans.  That means, if the property is sold to payoff the loan when the homeowner passes away or decides to leave the home for other reasons, the reverse mortgage debt will be paid off using the proceeds from the sale. The maximum amount owed is the current market value of the home.  If the homeowner’s heirs want to keep the home, they would pay the balance in full to the reverse mortgage lender.

THE HECM-ARM COULD BE MORE BENEFICIAL THAN THE HECM-FIXED OPTION

The basic fact to realize about using the HECM as a means of financial planning is that the fixed rate option may NOT be the best choice available.

The adjustable rate HECM product may be more attractive for three reasons:

  1. Future Draws

Fixed rate HECMs are present “Single Disbursement Lump Sum Payment” loans. That means that the homeowner only gets what they can get at closing, and there are no future draws available. Financial Planning entails options for the future, and the HECM-Fixed does not have that option.

  1. Making Payments

When deposits are made on the HECM-Fixed, it will lessen the outstanding principal balance. That is all it does. Meanwhile, when deposits are made on an adjustable rate of HECM, it will decrease the outstanding principal balance and also boost the line of credit.

  1. LOC Growth

The available line of credit increase due to two actions; PREPAYMENTS and LINE OF CREDIT GROWTH RATE. The growth will be worked out at the interest rate plus 1.25%. This is at the center of the Financial Planning benefit for a qualified retiree.

 What are the implications of FINANCIAL PLANNING     HERE’S AN EXAMPLE

Michael is 62 years old and has a home valued at $300,000. At 62 and an estimated rate of 5%, he can be eligible for a principal limit of $157,200. He would just accumulate interest and mortgage insurance premium (MIP) on the closing costs and funds that he needs from the LOC. The LOC will continue to increase over the years, and it can outgrow the value of the home. This affords Mark the financial flexibility to cater to unforeseen financial pressures in his later years.

At a point in his retirement, Michael could decide to convert his line of credit into a tenure payment or monthly term. That is possible anytime for a fee of $20.

qualify for a HECM

No prepayment fines are on HECM loans, and there are several benefits. Therefore, it is suggested that homeowners who are at least 62 years old having forward loan balances should consider converting their forward mortgage into a Reverse Mortgage. Making the same deposits on a HECM will still lessen the loan balance, but the deposits will also create future income opportunities.

REFERENCES

HUD 4330.1 Chapter 13-21B. ESTABLISH OR INCREASE A LINE OF CREDIT

A mortgagor may decide to make a partial prepayment start or boost a line of credit without changing monthly payments. By decreasing the unpaid balance, the mortgagor raises the net principal limit. All or part of the growth in the net principal limit may be reserved for a line of credit.

Find out more about What are the Implications of Financial Planning with a Reverse Mortgage

REVIEWS
5(based on 1 reviews)
  • Looks like you put a lot of work in here. Great information and very helpfull Brandon 07/26/2016

Call us today at 424 225 2167 for help. One of our mortgage professionals will help you get the best possible  Reverse Mortgage loan solution for your situation. We’ll be with you every step of the and not hand you off to someone else. AZ, CA, CO, HI, FL, NV, OR, TX, and WA.
*Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is a home-secured debt payable upon default or a maturity event. **Some restrictions apply. This material has not been reviewed, approved, or issued by HUD, FHA, or any government agency.

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 Call us today at 424 225 2167 or Chat or Email to explore your options. One of our mortgage professionals will help you get the best possible Reverse Mortgage loan solution for your situation. We’ll be with you every step of the process and not hand you off to someone else.
The services referred to herein are not available to persons located outside the state of California.
Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is a home-secured debt payable upon default or a maturity event. Some restrictions apply. This material has not been reviewed, approved, or issued by HUD, FHA, or any government agency.

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