Tom Dickson, Financial Advisor Channel Leader Phone: E:

Transcription

1 Tom Dickson, Financial Advisor Channel Leader Phone: E: Paul Pomeroy, HECM Specialist Phone: E: 2015 Reverse Mortgage Funding LLC, 1455 Broad St., 2nd Floor, Bloomfield, NJ NMLS ID # These materials are for general information purposes only and are not for use with individual consumers or for distribution to the general public. The information herein is not intended as legal, tax, or financial planning advice and should not be relied on or construed as such. This material has not been reviewed, approved, or issued by FHA, HUD, or any government agency. L217-Exp072016

2 RMF HIGHLIGHTS Former MetLife Bank executives Managed the market-leading reverse mortgage business Fully integrated reverse mortgage finance company Origination. Servicing. Securitization. Investing in reverse mortgage assets Well capitalized, with broad institutional support RMIT, our parent company, has raised approximately $275 million from institutional investors since 2014 Achieved double-digit market share in 2014 Focused on market growth initiatives 2

3 What is a Reverse Mortgage? Way to convert home equity to a useable resource a mortgage in reverse. Lender provides benefit based on home equity, payback is optional. 99% are FHA-insured Home Equity Conversion Mortgage (HECM) Non-recourse protection Guaranteed funds, as long as borrower meets their obligations Line of Credit growth 3

4 FHA-insured HECM Program One of clients on title must be 62 years old. Must be primary home and currently lived in. Available for single-family property, HUD-approved condo, or up to 4-unit home. (HECM for Purchase not available on multi-unit properties.) Proceeds can be used to purchase 2nd home or other property. Can be used to pay off first mortgage or HELOC.* A HECM cannot be called or canceled, as long as the terms of the loan are met. Clients downsizing can use a HECM to finance part of purchase. *Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is home-secured debt payable upon default or a maturity event. 4

5 BIG NEWS for clients age 62 or older: Guaranteed Income for $125 Initial Cost Our low-cost HECM option eliminates nearly all closing costs, and provides tax-free* cash. In this example: Provides $1,849 per month for as long as the client lives in the home Up-front cost: Approximately $125 for independent HECM counseling $420 annual servicing fee This low-cost pricing may not be available in all states, including FL and MD $221, years *Consult a tax professional. The estimates shown are based on a PA property and the HECM Arm Annual as of March 31, Assumptions include a home value of $625,500 and a 62-year-old borrower. The initial interest rate is 3.702%, expected interest rate of 5.03% tied to one year LIBOR with a margin of 3.0%. In this example, closing cost include an origination fee of $0, third-party closing costs of $5,176 depending on appraised value, and an up-front FHA Mortgage Insurance Premium of $3,127 depending on appraised value. The information being displayed is for illustrative purposes only. Interest rates and funds available may change daily without notice. Please call or visit reversefunding.com for details about credit costs and terms. $443, years $665, years 5

6 Example: HECM line of credit (LOC) growth 62-year-old client with $625,500 home in PA $125 Initial Cost (48 states) $322,407 $528,476 $866,255 NOTEWORTHY: Line of credit is still in-force if one borrowing spouse pre-deceases the other. Credit line amounts in year 10 & 20 are net of service fees. Credit Line Inception Year 10 Year 20 The information being displayed is for illustrative purposes only. Interest rates and funds available may change daily without notice. Please call or visit reversefunding.com for details about credit costs and terms. 6

7 HECM LOC vs. traditional Home Equity Line of Credit (HELOC) HELOC HECM LOC Line growth? 1 No Yes Cancelable? 2 Yes No Requires monthly Yes No repayment? 3 Age restriction? None Age The unused line of credit grows, making more funds available over time. 2 As long as the terms of the loan are met, a HECM line of credit cannot be canceled or reduced by the lender. 3 Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is home-secured debt payable upon default or a maturity event. 7

8 Longevity Risk How Long Will Client Savings Last? 20 or 30 or 40 Years? 8

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10 Funding longevity: High withdrawal rates can erode $1 million nest egg 62 year-old PA couple with $1 million portfolio, Social Security benefits and $450,000 home. Monthly living expense is $6,000 and life expectancy is 91 (husband) and 93 (wife). Projections below assume 8.75% annual investment return and 4.22% annual inflation rate. Withdrawal Rate Portfolio Longevity Probability of Success $90,000 Less in Taxes with HECM Current Scenario 15% 28 years <40% *Not tax advice, consult a tax professional. Assumes $1,300 monthly payment is added to client s plan. Add HECM tax-free cash* 3% 31 years 82% Note: Projections were calculated using MoneyGuidePro. The information being displayed is for illustrative purposes only. Interest rates and funds available may change daily without notice. Please call or visit reversefunding.com for details about credit costs and terms. 10

11 Funding longevity: High withdrawal rates can erode $1 million nest egg 62 year-old PA couple with $1 million portfolio, Social Security benefits and $625,500 home. Monthly living expense is $6,000 and life expectancy is 91 (husband) and 93 (wife). Projections below assume 8.75% annual investment return and 4.22% annual inflation rate. Withdrawal Rate Portfolio Longevity Probability of Success *Assumes $25,000 annual payment is added to client s plan in year 10. The cost to the client for maintaining a credit line for 10 years is $4,200. The available line will grow from approx. $234,000 (beginning) to $435,000 in year 10. Current Scenario 15% 28 years <40% Note: Projections were calculated using MoneyGuidePro. Add HECM LOC Draws in Y10* <3% 31 years 91% The information being displayed is for illustrative purposes only. Interest rates and funds available may change daily without notice. Please call or visit reversefunding.com for details about credit costs and terms. 11

12 Seniors with Mortgages? Tax Implications of Withdrawals Required to Make Mortgage Payments? Threat to Savings Longevity? 12

13 Mortgage payments in Golden Years: Create high withdrawal rates AZ Couple, 64 and 70 years-old, with $880,000 portfolio, Social Security benefits and $425,000 home and $198,000 in mortgages. Monthly living expense is $8,000 and life expectancy is 90 (husband)and 93 (wife). Projections below assume 5% annual return and 2% annual inflation rate. Current Scenario Withdrawal Rate 17% Portfolio Longevity 14 years Probability of Success <40% *Eliminate $2,000 monthly mortgage payment. Borrower is responsible for property taxes, homeowners insurance, and property maintenance. A HECM is home-secured debt payable upon default or a maturity event. Note: Projections were calculated using MoneyGuidePro. Refi with HECM* 3% 26 years 91% The information being displayed is for illustrative purposes only. Interest rates and funds available may change daily without notice. Please call or visit reversefunding.com for details about credit costs and terms. 13

14 Refi + Cash Out for Maximum Cash Flow Strategy Year 10 Year 10 $360, % Withdrawal Rate Current: $1,500 Monthly P&I Payment -$180,000 After: No P&I + $1,500 Monthly Cash Out For $3,000 Positive Change Current: 66-year-old client with $600,000 home in VA and $1,500 monthly mortgage payment on $90,000 mortgage. After: Client refinances with HECM to (1) eliminate $1,500 monthly mortgage payment and (2) draw $1,500 monthly payment or cash out. NET: Positive cash flow change of $3,000 per month ++ clients reduced withdrawal rate from savings from 10% to 4% 14

15 Best Financial Strategy for Rightsizing? How many clients make uninformed decisions? 15

16 67-year-old Purchases a Home A Planning Opportunity Typical Scenario: Step 1: Clients Sell $300,000 NC Home, Payoff $90,000 Mortgage and Net $200,000. Alternative with HECM Purchase: Step 1: Clients Sell $300,000 NC Home, Payoff $90,000 Mortgage and Net $200,000. Step 2: Clients Buy $400,000 Condo with $200,000 Net Sale Proceeds Plus $200,000 IRA Withdrawal Step 2: Clients Buy $400,000 Condo with $200,000 Net Sale Proceeds and finance ~$200,000 with HECM Purchase (no payments required) Results: Tax Bill for ~$30,000 Impact on Client Cash: ($230,000) OR Results: NO Tax Impact Impact on Client Cash: $0 16

17 72-year-old Purchases a Home A Planning Opportunity Typical Scenario: Step 1: Clients withdraws $200,000 from IRA to purchase FL Home as second home. Alternative with HECM Purchase: Step 1: Clients use HECM Purchase to finance ~$110,000 of $200k Purchase Price (no payments required). Balance comes from IRA. Note: FL Home will be client s primary residence; i.e. will live there 6+ months/year). Results: Tax Consequences: $40,000 Tax Bill Client Cash: (-$240,000) OR Results: Tax Consequences: $18,000 Tax Bill Client Cash: (-$108,000) 17

18 Identifying Possible Clients Possible clients could be ones that are (1) 62 or older* (2) own their home (3) have >50% in home equity and Withdrawal rates exceed 4-6% industry standards and/or have insufficient savings to last their lifetime(s); i.e. clients could benefit from another source of income. Complain about paying too much in taxes due to withdrawals from qualified accounts. Again, clients can benefit from another source of income. Struggle with monthly cashflow due to mortgage payments. The could refinance their mortgage with a HECM and eliminate their monthly payment. If they have sufficient home equity, they many also be eligible to draw additional cash with a HECM. Have healthcare risk and no protection. * Only one client has to be 62 or older. 18

19 RMF Sponsored Past Webinars The Pros & Cons of Mortgage Payments for Older Clients Guest Speaker: Dr. John Salter When: December 18, 2015 Click here to view recording How to Maximize Your Social Security Under New Legislation Guest Speaker: Larry Kotlikoff When: December 1, 2015 Click here to view recording To Age in Place or Not? Clients Need Your Advice! Guest Speaker: Jim Allen When: November 18, 2015 Click here to view recording Expert Insight on Recent Social Security Changes Guest Speaker: Kurt Czarnowski When: November 12, 2015 Click here to view recording To view all on-demand past webinars, visit 19

20 RMF Sponsored Upcoming Webinars Get Your Social Security Questions Answered by #1 Expert Guest Speaker: Laurence Kotlikoff When: Tue, February 9, :00 PM to 12:30 PM EDT The New Case for Reverse Mortgages Guest Speakers: Wade Pfau and John Salter When: Tues, March 15, :00 PM to 1:00 PM EDT To register for all upcoming webinars, visit 20

21 For more information or a loan quote Contacts: For a quote, all you need is: 1. D-O-B of youngest client 2. Estimated home value 3. Total debt on home (if any) 4. Property address Paul Pomeroy, HECM Specialist P: E: ppomeroy@reversefunding.com Tom Dickson, Planning Strategies P: (412) E: tdickson@reversefunding.com 2015 Reverse Mortgage Funding LLC, 1455 Broad St., 2nd Floor, Bloomfield, NJ NMLS ID # This material is for general information purposes only and not for use with individual consumers or for distribution to the general public. The information herein is not intended as legal, tax or financial planning advice and should not be relied on or construed as such. This material has not been reviewed, approved or issued by FHA, HUD or any government agency. 21