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Thank you for visiting my website. A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a HUD Program that is insured by the Federal Housing Administration (FHA) enabling retirees across the country to live a more enjoyable retirement. Here at Retirement Funding Solutions, our goal is to help our customers make the right, informed decision about funding their retirement.

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Here are some common examples of what a HECM can help you do:

  • Purchase a new home to fit your lifestyle needs
  • Protect your retirement portfolio
  • Reduce monthly expenses by paying off existing mortgage or other debts
  • Enhance your cash flow
  • Incorporate housing wealth into your retirement plan
  • Create an emergency fund
  • Increase cash to help ensure monthly bills are paid
  • Fund for home repairs or upgrades
  • Reduce the burden of out-of-pocket healthcare costs
  • Fund the expense for caregivers, live-in nurses, or other in-home care
  • Have the cash for a large expense, such as a vacation or vehicle

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Home Equity Mortgage Overview

The Home Equity Conversion Mortgage (HECM) is an FHA insured reverse mortgage and is the safest and most popular type of reverse mortgage on the market. HECM’s are the only reverse mortgage insured by the federal government through the Federal Housing Administration (FHA), a division of the Department of Housing and Urban Development (HUD).

The HECM allows home-owners, ages 62 and better, to convert part of their home equity into tax-free proceeds.* There is never a required monthly mortgage payment on a HECM, and there is no pre-payment penalty if the consumer ever chooses to pay the loan back in part or in full. Repayment of the loan can never exceed the home’s value and the heir’s will never inherit a debt, unless they choose to retain the home as their own property. The borrower always retains title to the home and no repayment is required until the borrower either permanently leaves the home, fails to maintain the property or fails to pay the property taxes and insurance.

*Consult a tax specialist

Because the proceeds are a tax-free loan, there is generally no effect on Social Security or Medicare benefits. However, income-based programs may view the HECM as an additional cash flow source. Therefore, it is always best to consult an advisor when receiving benefits from an income-based program before pursuing the HECM.

The loan amount of the HECM is based on the age of the youngest borrower or eligible non-borrowing spouse living in the home, the home value, and current interest rates. Borrowers must attend HUD-certified counseling prior to applying for a HECM loan.

There are several ways to receive the funds from the HECM including:

  • A single lump sum disbursement
  • Equal monthly disbursements for as long as the consumer remains in the home
  • Equal monthly disbursements for a set amount of time according to the consumer’s choosing
  • A line of credit, in which funds are available to be drawn upon whenever the consumer chooses
  • A combination of monthly disbursements and a line of credit

*Fixed rate mortgages are limited to the single lump sum disbursement option. The disbursement of mortgage proceeds during the first twelve-month period is subject to an initial disbursement limit.

 Line of Credit Explained

One of the options for borrowers to receive proceeds from the HECM is a Line of Credit. Unlike a traditional HELOC, which can be reduced or closed at any time the bank chooses, the unused funds in the line of credit are guaranteed to be available to the borrower as long as they live in the home.

In addition, the HECM line of credit option has a growth rate which increases the unused amount of funds in the line automatically. This provides an easy way to tap into the borrower’s equity without having to refinance again. The most unique feature of the growth rate on the line of credit, is that it also happens to be the same rate that is accruing interest against the loan balance. As long as there are minimum funds available in the line of credit, they will grow at that rate. If the borrower wishes to pay off the HECM loan balance, then the unused portion of the line of credit will dissolve as equity.

Eliminate a Mortgage Payment

If a borrower has a current mortgage, the HECM will pay off the current mortgage debt and thus eliminate a mortgage payment entirely since no mortgage payments are required on the HECM loan. The borrower is only responsible for paying property taxes and insurance, maintaining the property and making any repairs as were required as part of the loan terms.

*The payoff of an existing non-HECM lien using HECM proceeds is only permitted if it has been in place longer than 12 months or resulted in less than $500 to the borrower, whether at closing or through cumulative draws.

Monthly Income

The HECM product can be a great source of additional revenue for consumers and supplement monthly income. A popular disbursement choice for many consumers is the tenure payment option. This provides equal monthly disbursements to the borrower for as long as they remain in the home. The monthly disbursements are guaranteed to continue throughout the borrower’s lifetime regardless of home value increase or decrease.

A term payment will provide equal monthly disbursements to the borrower for a set amount of time that the borrower chooses. This provides a slightly higher monthly amount but will cease at the end of the term. Of course with any payment option selected (except the lump sum option), the borrower can contact the servicer of the loan at any time to request a plan change for a small fee.

Borrower Protections

Home Equity Conversion Mortgages are insured by FHA, made possible by the payment of MIP (mortgage insurance premium) through the loan, this provides a non-recourse feature for the consumer.

Aspects of the non-recourse feature are as follows:

  • The consumer will not owe more than the home is worth at the time the loan is paid back, either by death or sale of the property or failure to pay taxes
  • The home is the only asset that can be used to pay the loan balance.
  • This prevents the lender from using any other accounts belonging to the consumer or to the heirs (estate) to recoup the loan balance. (e.g. Even if the home was in a living trust that still has millions in available other assets in the trust, the home value is still the maximum amount that can be used to recoup the balance. Thereby leaving the other assets untouched.)

The non-recourse feature also provides benefits to the heirs of the property.

If an heir inherits the property, the heir may choose to either:

  • Sell the home and the proceeds of the sale will pay back the loan with any remaining equity being given to the heir
  • Refinance the home into their name and pay off the existing HECM balance
  • If the heir refuses ownership rights to the home completely, the servicer will foreclose on the home in order to recoup the outstanding loan balance, with no adverse effect on the heir’s credit
  • Potential deferred interest deductions available to the heirs at time of sale.

Please consult your tax professional

HECM Loan Costs

Loan costs are similar to a traditional FHA mortgage. There are 3rd party fees, mortgage insurance made payable to HUD and loan origination fees. Contact me, a licensed Retirement Funding Solutions specialist, to review your options.

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There are various loan program options available to you through Retirement Funding Solutions.  Our goal is to provide the very best in price, product and service, so that you can make the right, informed decision about whether a Home Equity Conversion Mortgage meets your retirement needs.  While other lenders might charge a monthly servicing fee; we do not charge any servicing fees on any of our HECMs.
We offer fixed rate, variable rate and Jumbo reverse mortgages.

Fixed Rate

This HECM option provides the security of a fixed interest rate for the life of the loan. It may be a great option when taking a full draw to pay off a large mortgage or for a new home purchase with a HECM for Purchase.

Variable Rate  

We offer both annually and monthly adjustable rate mortgages (ARMs).  Similar to traditional ARM’s, your initial interest rate is comprised of a fixed margin and an index that will adjust on either an annual or monthly basis. All variable loans have a lifetime interest rate cap.
The benefit of a viable rate HECM is that it provides the greatest flexibly on how you elect to take your loan proceeds.  Variable HECMs allow you to set up ongoing monthly term or tenure payments and/or set up a growing line of credit.
 

Unique Benefits of the HECM Line of Credit:

  • This federally insured LOC cannot be frozen, cancelled or reduced, even if  home values fall.
  • All of the un-used credit grows every month, based on the Credit Line Growth Rate.  
  • The Credit Line Growth Rate is tied to the interest rate. If interest rates rise, the growth rate on the LOC will also increase, offering greater borrowing power
  • Since this is a HECM, debt service is optional.  Your can defer all principal and interest until the borrower(s) permanently vacate the home**
  • If the client chooses to make payments at any time, the available credit increases accordingly (just like a traditional HELOC).

JUMBO Reverse Mortgages

This jumbo reverse mortgage offers greater lending limits and loan amounts when compared to the traditional HECM loan. This loan is only available with a fixed rate and may be a good fit for higher value homes.

PLEASE CONTACT ME FOR MORE DETAILS AND/OR QUALIFYING INFORMATION FOR ANY OF THE ABOVE PRODUCTS.

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Home Equity Conversion Mortgage for Home Purchase (H4P)

If your goal is to right size your housing needs by purchasing a new home instead of accessing the equity in your current home, one way to do so is to utilize a HECM for Home Purchase (also known as an H4P, Reverse For Purchase and Purchase HECM).   This means utilizing a HECM loan on the home you are buying instead of having to qualify for a traditional mortgage.  When you utilize a Purchase HECM, your HECM funds are paid in a lump sum directly to the seller at the close of escrow – just like with a traditional mortgage.  However, the big difference is that you will never be required to make monthly loan payments for as long as you live in your new home**.

The Purchase HECM is ideal for those who want to purchase the best home for their retirement needs – without impacting their monthly cash-flow by taking on another monthly payment obligation.

 Benefits of Purchasing Your Next Home With a HECM

1. Increased purchasing power to buy the home that best meets your needs
2. Keep additional cash assets in reserve to maintain a more comfortable retirement
3. Increased monthly cash flow- since monthly mortgage payments are not required you are able to minimize
    the impact on your monthly obligations

Comparing H4P to other Purchase Options

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Qualify for a HECM for Purchase

Whether you are rightsizing your housing needs, moving closer to family, a better climate or simply to a home that better meets your needs, qualifying criteria for a HECM is much easier than that of a traditional mortgage. All you need is…

  • Have a minimum of 50% as a down payment on the home, the percentage of which is determined by your age: the older you are, the lesser the amount is required to put down.
  • Live in the new home as your principal residence and keep up with property maintenance, taxes and insurance
  • Meet the current residual income and credit requirements
    It is still possible to qualify for a HECM, however a set aside of funds for your property taxes and   insurance may be required if income and credit requirements are not met.

Requirements of the Homeowner and Safeguards

  • Homeowners are responsible for maintaining the home as their primary residence, keeping up with property maintenance, and staying current on paying property taxes, required insurance, and any homeowners’ fees. Home must be maintained in habitable condition as defined by HUD.  
  • The balance of the loan, including interest charges, becomes due when the borrower(s) do not use the home as their primary residence or fail to meet their responsibilities under the terms of the loan.
  • Neither your estate nor your heirs are personally liable to cover the difference if your home is sold at a loss if, at the time of your passing (e.g. your loan balance is greater than the value of your home). 

**Borrowers are responsible for occupying the home as their primary residence, keeping up with property maintenance, and staying current on paying property taxes, required insurance and any homeowners’ fees. The balance of the loan, including interest charges, becomes due when the borrowers do not use the home as their primary residence or fail to meet their responsibilities under the terms of the loan.

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Q: Are monthly payments required on the HECM mortgage?

A: No monthly mortgage payments are ever required. The only financial responsibilities of the homeowner are payment of homeowner’s insurance (flood insurance if applicable), property taxes and to maintain a general upkeep of the home. However, if the borrower wishes to make payments on the HECM, there is no penalty.

Q: Will the lender own my home with a HECM mortgage?

A: No, the lender does not take control of title. The borrower will retain ownership of the home and rights to title. The lender’s concern is limited to the outstanding balance of the loan.

Q: When I pass away, will my heirs be responsible for the repayment of the HECM loan?

A: The HECM is a non-recourse loan, therefore the home is the only asset the lender can pursue to repay the loan balance. The heirs, or the estate, will only need to pay back the HECM loan if they choose to retain ownership of the home. They can do so by refinancing into their own name or purchasing the home for 95% of the value at the time the last borrower passes away. If they wish to sell the home, they can do that as well. Any remaining proceeds from the sale of the home, after paying the HECM balance, will go to the estate. If the heirs choose to refuse ownership, then the servicer will foreclose on behalf of the lender to seek restitution for the loan balance. However, this will not reflect negatively on any of the heirs’ credit.

Q: How can I receive proceeds from the HECM loan? Is a monthly disbursement my only option?

A: Proceeds from the HECM are tax-free and can be distributed in a variety of ways based on the borrower’s choosing. Among these are: monthly disbursements (set to be distributed for the lifetime of the borrower or for a specific amount of time), a single lump sum received at funding, a stand-by line of credit to be drawn upon when the borrower chooses or a combination of monthly disbursements with a line of credit.

Q: Will the proceeds from the HECM affect my Social Security or Medicare benefits?

A: No, the loan proceeds from a HECM generally do not affect Social Security, Medicare or pension benefits. However, they may have an impact on Medicaid, Supplemental Security Income (SSI) or other income-based programs, which vary from state to state. For details on your specific situation, please contact the benefits professional concerning that area.

Q: How difficult is it to qualify for a HECM?

A: It is not difficult at all! You must occupy the home as your primary residence, be at least 62 years of age, the property must be eligible for financing (single family, 2-4 units, FHA approved condominiums, townhomes, planned unit development (PUD), and ensure you have enough income to pay your monthly obligations including property taxes and insurance.

Q: We may be looking to downsize, is the HECM only used for refinances?

A: Great! The HECM can be used to purchase your next new home with a single down payment and no recurring monthly mortgage payments. See buying a home to learn more.

Q: What if my home needs some repairs? Am I disqualified from getting a HECM loan?

A: Using the equity in your home through a HEMC mortgage is a great way to get cash needed for home repairs without increasing your monthly expenses. It is also possible to have cosmetic repairs completed after the loan funds dependent upon underwriters’ review of required repairs.

Q: If no monthly payment is due, then when do I payback the loan?

A: The loan is due when a triggering event, or maturity event occurs. These include:

  • When the last surviving borrower dies and there is no spouse remaining in the home
  • When the home is sold
  • If the home is vacated for 12 consecutive months or more
  • Failing to pay property taxes or insurance
  • When the home is no longer deemed habitable as defined by HUD.  

Q: We like to take long vacations and travel. Will that be a problem after we get a HECM?

Not at all! You may want to let servicing know of where to send your mortgage statements if you will be gone for long periods of time. But as long as you do not permanently leave the home or leave for longer than 12 consecutive months, your HECM loan will remain intact.

Q: I am married to someone who is not 62. Can we still get a HECM loan?

A: Yes! Unfortunately the younger spouse will not be able to be on title or be a co-borrower on the loan, but they will be protected under HUD guidelines to remain living in the home even after the older spouse passes away or is placed in a permanent healthcare facility.

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The path to closing your HECM and using your home equity as tax-free proceeds is an easy one.  The first step will be attend HECM counseling as is required by HUD. For a complete list of counseling agencies, please contact me.

Once counseling is completed, the next step would be to fill out an application for your customized HECM program. After that, simply send me all documents required by the underwriter and you’re all set!

CONTACT ME TO GET STARTED ON THE HECM PROCESS.

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Homa Rassouli

Homa Rassouli, NMLS #455497, Reverse Mortgage Specialist

Retirement Funding Solutions

“I value the opportunity to help you discover how a Reverse Mortgage will benefit your life.”

With more than 30 years in the financial services and mortgage industry, the last ten exclusively in the Reverse Mortgage business, Homa Rassouli brings extensive knowledge and expertise to her work. Homa’s goal is to transform the lives of her clients with the benefits of a Reverse Mortgage. She provides the education clients deserve so they can make wise and informed decisions. Whether they are looking to stop making monthly mortgage payments, extend a retirement portfolio or simply age in place, Homa makes recommendations that suit each client’s individual needs.

“The best part about my job is seeing how a client’s Reverse Mortgage allows them a more satisfying life.”

Homa began her career at Wells Fargo Bank, where she received the designation of “Top Producer” for more than 10 of those years. With the closing of Wells Fargo’s Reverse Mortgage division in 2012, Homa joined Security 1 Lending. She Presently works for Retirement Funding Solutions one of the largest Reverse Mortgage companies in the nation. Homa is the recipient of the prestigious “President’s Club” honor.

Homa currently serves as a Rotarian , she is very involved and fully committed to help give back to the community. Homa is involved with Novato and San Rafael Chamber of Commerce. Homa is also involved with Solano and Marin Realtor Association. Homa is an active member of the Novato Garden Club, Naifa and on the AAUW Board. She is also actively involved with Marin Builders Association, WCR and a BNI member.

Homa holds a Bachelor of Business Administration in Management and Finance from Gannon University in Erie, PA. She is certified through American University to teach Reverse Mortgages to financial planners, realtors and professionals in other industries.

She spends much of her free time with her family, especially her two granddaughters, Sofia, age 6, and Ellie, 2 years.

You may contact Homa at 415-717-4618 or by e-mail at hrassouli@rfslends.com to learn more about Reverse Mortgage and determine if it is the right solution for yourself or your client. Many things have changed in Reverse and I would love to talk to you with any questions you might have. Thanks.

 

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