Reverse Mortgages

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Agenda. What is a Reverse Mortgage?Who offers Reverse Mortgages?Who Qualifies?TypesReverse Mortgage vs SellingReverse Mortgage Calculator. What is a Reverse Mortgage?. A mechanism for a family to realize part of the equity on its fully-paid principal residence while continuing to live in it d

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Reverse Mortgages

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1. Reverse Mortgages

2. Agenda What is a Reverse Mortgage? Who offers Reverse Mortgages? Who Qualifies? Types Reverse Mortgage vs Selling Reverse Mortgage Calculator

3. What is a Reverse Mortgage? A mechanism for a family to realize part of the equity on its fully-paid principal residence while continuing to live in it during retirement. Essentially the mortgager has a put option to make the issuer of the reverse mortgage take either the house or the value of the mortgage, whichever is less. The value of the put option rises with the length of time to expiration.

4. Agenda What is a Reverse Mortgage? Who offers Reverse Mortgages? Who Qualifies? Types Reverse Mortgage vs Selling Reverse Mortgage Calculator

5. Who Offers Reverse Mortgages? Canadian Home Income Plan (CHIP) Aided By: NATIONAL CHARTERED BANKS CREDIT UNIONS MORTGAGE BROKERS INVESTMENT AND FINANCIAL PLANNING FIRMS

6. Agenda What is a Reverse Mortgage? Who offers Reverse Mortgages? Who Qualifies? Types Reverse Mortgage vs Selling Reverse Mortgage Calculator

7. Who Qualifies? Homeowner(s) aged 62 or older Own your home with your name(s) on title Home is principal residence Borrowing secured by home (including balance on any other mortgage or secured line of credit) does not exceed the amount available from the Reverse Mortgage

8. Who Qualifies? Type of home meets CHIP criteria Home is located in area where CHIP Reverse Mortgage is available No minimum income required Medical conditions have no effect on eligibility

9. Agenda What is a Reverse Mortgage? Who offers Reverse Mortgages? Who Qualifies? Types Reverse Mortgage vs Selling Reverse Mortgage Calculator

10. Types Term or Straight Reverse Mortgage Reverse Annuity Mortgage (RAM) Line of Credit Reverse Mortgage

11. Term or Straight Reverse Mortgage Provides a lump sum of cash to the owner At the end of the term the principal and accrued interest are due Family can either pay off the mortgage or sell the house and pay the mortgage from the proceeds

12. Term or Straight Reverse Mortgage The lender is limited to receiving the value of the house Appropriate for people who only need money for a short time Amount owing seems to grow quite quickly, because it is accumulating without repayments

13. Example A home is worth $150,000. The owner gets a five-year term Reverse Mortgage and receives a lump sum payment of $50,000. Interest builds on that money for five years, at which time the entire amount must be paid back.

14. Reverse Annuity Mortgage Provides a life annuity to the owner At death or when the house is sold, the mortgage must be settled. The estate or retiree receives the difference between the value of the house and the mortgage.

15. Reverse Annuity Mortgage The lender cannot recover more than the value of the house. Best for people who want the security of a monthly income for the rest of their lives.

16. Example A home is worth $200,000. The home owner takes out a Reverse Mortgage for $50,000. That $50,000 used to buy an annuity which pays out $300 a month. In ten years time the house is sold and the $50,000 plus interest is paid back. The $300 monthly income from the annuity continues for the rest of the life of the home owner.

17. Line of Credit Reverse Mortgage Plan allows the borrower to take out only the amount of money he or she requires at any given time Maximum annual amount Interest is calculated on the total amount withdrawn Ideal for people who only want to withdraw money when they need it.

18. Example A home is worth $100,000. The home owner takes out a Line of Credit Reverse Mortgage, and withdraws $3,000 in the first year to pay for home repairs. Interest is charged on the $3,000. The next year, $2,000 is taken out to fund a vacation. Interest is charged on the total amount withdrawn ($5,000) and the interest accumulated on the $3,000.

19. Agenda What is a Reverse Mortgage? Who offers Reverse Mortgages? Who Qualifies? Types Reverse Mortgage vs Selling Reverse Mortgage Calculator

20. Reverse Mortgage vs Selling Inflation protection that owning a home brings is gone but so are the operating costs. The retiree will not face inflationary increases in rent, although some expenses will rise with inflation. Psychological benefits of owning a home Risk of value changes is partly shared with the mortgager, since the repayment is limited to the value of the home.

21. Agenda What is a Reverse Mortgage? Who offers Reverse Mortgages? Who Qualifies? Types Reverse Mortgage vs Selling Reverse Mortgage Calculator

22. Reverse Mortgage Calculator Reverse Mortgage Calculator

23. Final Thought/Questions A reverse mortgage does not seem to offer the pattern of retirement income that is useful , except for some one who is very unlikely to want to occupy the house after the term expires.

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