HECM The 4 th Leg of Retirement Planning 1
Dec 25, 2015
2
A HECM by any other name
HECMs = 99% of “Reverse Mortgages”
Benefits of FHA-Insurance• Line of Credit Growth• Crossover Risk• Nonrecourse Protection
Home Equity Conversion Mortgage• FHA-Insured
3
HECM Line of Credit: $252,083
Inception Year 10 Year 20$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
$252,083
$468,323
$870,055
2
62 year-old Client with $500,000 Home
NOTEWORTHY: Line grows EVEN if Home Value goes to $0.
Line is still in-force if one spouse passes.
4
Line growth? No Yes
Cancelable? Yes No
Requires repayment? Yes No
Age restriction? None 62
HECM LOC vs. HELOC
HELOC HECM LOC
5
HECM Monthly Payment: $1,434
Inception Year 10 Year 20 Year 30$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$1,434
$172,080
$344,160
$516,240
Monthly Payments
62 year-old Client with $500,000 Home
NOTEWORTHY: Payments continue EVEN if Home Value goes to $0.
Payments continue even if one spouse passes; provided survivor lives in home, pays taxes and insurance and maintains the home.
6
HECM TERM Payment: $1,500/month for 4 years
+ Credit Line of $184,686 that will grow
Age 63 Age 64 Age 65 Age 66$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$18,000 $18,000 $18,000 $18,000
$196,878 $209,876 $223,731 $238,501
Monthly Payments Line of Credit
NOTEWORTHY: Payments continue EVEN if Home Value goes to $0.
Line can be accessed at any time.
7
HECM Line of Credit: $147,583
Inception Year 10 Year 20$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$500,000
$147,583
$274,181
$450,028
2
82 year-old Client with $250,000 Home
NOTEWORTHY: Line grows EVEN if Home Value goes to $0.
Line is still in-force if one spouse passes.
8
HECM Monthly Payment; $1,130
Inception Year 10 Year 20 Year 30$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
$450,000
$1,130
$135,600
$271,200
$406,800
Monthly Payments
82 year-old Client with $250,000 Home
NOTEWORTHY: Payments continue EVEN if Home Value goes to $0.
Payments continue even if one spouse passes; provided survivor lives in home, pays taxes and insurance and maintains the home.
9
Where does a HECM fit…Client First “Strategies”
Social Security Deferral
Outliving their Assets: Are your clients in the “Confidence Zone”?
Portfolio Management: Standby Line as 3rd Bucket
CashFlow: Payoff First Mortgage or HELOC
Downsizers can use HECM to Purchase Home
Reduce IRA Distributions (and Taxes) that Exceed RMDs
Where does HECM fit?
NO HECM $60,000 $ 72,000 $ 84,000 $ 96,000
$500,000 6% 1% 0% 0%
Portfolio Value $750,000 44% 16% 4% 1%
$1,000,000 79% 49% 24% 9%
Annual Spending
Where does HECM fit?
With $1,500 HECM $60,000 $ 72,000 $ 84,000 $ 96,000
$500,000 35% 6% 1% 0%
Portfolio Value $750,000 79% 43% 15% 4%
$1,000,000 95% 76% 49% 25%
Annual Spending
12
For More Information or To Schedule a Presentation
Kelly J DeWolfNMLS 543244
P: (406) 431-4651Email: [email protected]
14
FHA-insured HECM ProgramFHA-insured HECMs (Home Equity Conversion Mortgages) are a way for homeowners, 62 and over, to access equity they have in their homes.
Must be primary home and currently lived in, can be out 365 consecutive days.
Single family property, HUD-approved condo, or up to 4-unit home.
Proceeds can be used to purchase 2nd home or other property.
Can be used to payoff first mortgage or HELOC.
Clients downsizing can use HECM to finance part of purchase!
15
Benefit Payment OptionsLump Sum A withdrawal of your available benefit at loan closing (the entire amount or a partial amount), typically to pay off your existing mortgage balance, if any, and to provide cash.
Fixed Monthly Payments Tenure A fixed monthly payment for as long as you remain in the home. Term A fixed monthly payment for a specific term that the borrower determines.
Line of Credit A credit line the borrower can access at any time. The unused balance has a growth feature, which means the borrower will have access to additional benefits the longer they remain in their home. Unused Line GROWS over time.
A Combination of Any of These Options
HECMs cannot be called or cancelled as long as requirements are met.