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A Home Equity Conversion Mortgage* Can Increase New Home Construction & Remodel Business
NOTE: *Most reverse mortgage loans today are federally insured through the Federal Housing Administration’s Home Equity Conversion Mortgage (HECM) Program. This information is HECM loans only.
Why Not Have More Lending Options Available?
How a H4P Can Benefit You & Your Clients
INCREASE PURCHASING POWER – Makes Buying A Higher Priced Home With Desired Upgrades/Amenities Easier To Afford
MORE REMODELS – More Seniors Upgrading Their Home So They Can Live In Home Instead Of Long-Term Care
CAPTURE NEW CUSTOMERS – Don’t Want A Monthly Mortgage Payment (Taxes, Insurance And Maintenance Always Required To Be Paid), But Are Hesitant To Use The Majority Of Their Assets To Purchase A New Home
SET YOURSELF APART – Be the First Builder In Your Local Market to Educate Consumers
According to the National Reverse Mortgage Lenders Association (NRMLA), More Than a Million Households Across the Nation Are Using a HECM Reverse Mortgage.*
Key Facts:
- Only One Loan Required
- Fixed- And Adjustable-Rate Options
- Homeowner Remains On Title As Long As He/She Lives In The Home As Primary Residence And Abides By All Other Loan Terms.
- FHA-Insured Home Financing
- Down Payment Of Between 35-55% Of Purchase Price Is Required, And Is Based On Several Factors, Including The Age Of The Youngest Borrower.
- Borrower Will Have No Monthly Mortgage Payments; Taxes, Insurance And Maintenance Are Always Required To Be Paid.
- No Repayment of Loan Until Borrower No Longer Lives In The Home and Continues To Abide By All Loan Terms.
- Pre-Qualification** Will Take Place Up Front With Pre-Qualification Letter Provided
- Once The “Certificate Of Occupancy” Is Issued, The Application Will Be Finalized And The Appraisal And Title Documentation Will Be Ordered
BENEFITS FOR YOUR CUSTOMER
- Only 35-55% Down Payment
- No Monthly Payment Except For Taxes, Insurance, And Maintenance
- Increase In Client’s Cash Flow
- Minimal Income And Credit Requirements
- Available In Fixed- Or Adjustable-Rate Options
- Potential Additional Funds For Remodeling Projects
BENEFITS FOR YOU
- More Shoppers Can Become Homebuyers
- Projected Increase For Sales And Add-Ons Of 30% And Up
- More Foot Traffic
- More Upgrades & Add-Ons Are Purchased
- Happier Buyers Who Get More For Their Money
- Average Purchase Price Increase
- Better Realtor® Relationship
*Source: https://www.nrmlaonline.org/2017/02/09/annual-hecm-endorsement-chart
**A pre-qualification is not an approval of credit and does not signify that underwriting requirements have been met.
A Home Equity Conversion Mortgage for Purchase (H4P) can help…
…your customers buy their next home with 45-65% less money up front than if the borrower were to pay the entire purchase price outright. To pay for the down payment, the funds can come from the sale proceeds of their last home, 401k, and other sources that meet the U.S. Department of Housing and Urban Development (HUD) and lender guidelines.
The amount down is figured from several factors: Age of the youngest borrower, current interest rates, and whichever is lesser between the three (appraised value, purchase price, or the FHA lending limit). The H4P loan has no monthly payments, except for taxes, insurance, and general maintenance.
H4P Qualifications
- Must Be Age 62 Or Older
- New Construction Allowed Once The Certificate Of Occupancy Is Issued
- Condos Must Be FHA-Approved; One-To-Four Units, Townhomes And Manufactured Homes May Qualify
- Everyone On The Title Has To Complete The Required Counseling (Non-Borrowing Spouse, Spouse, Children, POA, Etc.)
- Maximum Loan Amount Is Based On The Age Of The Youngest Borrower
- All Liens On Title MUST Be Paid At Closing And MUST Be In The Borrower’s Name
- The Difference Between The Purchase Price Of The New Home And The HECM Loan Proceeds Must Be Paid In Cash From Qualifying Sources Such As The Sale Of The Homebuyer’s Prior Residence, Assets Or Savings
Baby Boomers Are On The Move Giving You The Perfect Opportunity to Boost Your Business!*
- Last Year, Approximately 4.2 Million Baby Boomers Moved Homes
- Only 51% Downsized Into A Smaller Home
- Retirees Are Predicted To Have The Largest Household Growth Rate Of Any Generation Within The Next Five Years
- They Have A Greater Freedom From Work And Family Obligations To Choose Where They Want To Live
*Source: Moving forward to economic stability, MBA David H. Stevens
Baby Boomers Can Boost Your Business
Did you know baby boomers are projected to have the largest household growth rate in the next decade with millions of seniors moving into the 60+ age group in the next 10 years1? Since they tend to have fewer obligations than other generations, baby boomers are given the flexibility and freedom of choosing where to live. The H4P program can help them find a home that fits their needs with no monthly mortgage payments, except for taxes, insurance, and general maintenance.
Changing the Way…
…Retirement Is Done in the United States
Perfect Storm Statistics
- 10,000 People Turn 62 A Day
- Fewer Pensions & Defined Benefit Plans
- Lowest Return On Investment For Decades
- 76% Plan To Delay Retirement
- Less Than 7% Have Long Term Care Insurance, But Approximately 70% Are Likely To Need It
- Greater Need For Security And Certainty Than Ever Before Since We Live Longer Which Causes Concern About Outliving Our Money
- Majority of Baby Boomers Have Equity in Their Home
- Over $5 Trillion In Seniors’ Home Equity
If All Baby Boomers Retire At 62 – 84% Would Be In Jeopardy Of Running Out Of Money At 66 – 50% Would Still Be Likely To Run Out Of Money
*Figure 4: Center of Retirement Research at Boston College Falling Short: The Coming Retirement Crisis and What to do About it
With 64% of seniors wanting to lower monthly housing costs4, the H4P loan has no monthly mortgage payments although taxes, insurance and HOA dues (if applicable) must still be paid and the home must be maintained. Funds from your client’s last home sale, 401K and other sources that meet the Housing and Urban Development (HUD) and lender guidelines can be used for the down payment. This loan option can also help your customers buy their next home with 45-65% less money down than if they were to pay for the home outright. The percentage of the down payment required (35-55%) depends on several factors, including the age of the youngest borrower.
Reverse Product Knowledge
Seller Concessions Not Allowed With H4P
- No Lender Credits
- No Realtor® Credits
- Sellers Cannot Pay For The Following:
Owner’s Title Insurance
Home Warranty
Property Survey
Buyer’s Closing Costs Or Pre-paids - Realtors® Should Negotiate A Lower Purchase Price Up Front Based On The Fact Sellers Are Not Allowed To Pay The Items Listed Above At Closing
- If Home Inspection Is Listed On The Purchase Contract, A Copy Of The Home Inspection Must Be Provided To Lender For Review And Any Safety Issues Must Be Fixed
Reverse Mortgage Advantages
- Federal Housing Administration (FHA) Guarantees No Repayment Of The Loan Until The Last Borrower Moves Out, Sells Or Passes Away*
- When Client Moves Out Of Their Home, Client Or Their Estate Has Up To 12 Months To Repay The Loan
- No Penalty For Early Payment (May Vary In Some States)
- This Loan Is A Non-Recourse Loan (If The Balance On The Loan Exceeds The Home Value, HUD/FHA Makes Up The Difference!)
- Heirs Of Estate Keep Any Excess Proceeds From The Sale Of The Home
*There are some circumstances that will cause the loan to mature and the balance to become due and payable. Borrower is still responsible for paying property taxes, insurance and maintenance. Credit is subject to age, property and some limited debt qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.
This table shows the estimated funds available from utilizing an FHA-insured reverse mortgage to purchase a home. This information is provided as a guideline and does not reflect the final outcome for any particular homebuyer or property. *The actual reverse mortgage available funds are based on current interest rates, current charges associated with loan, borrower date of birth, the property sales price and standard closing cost. Interest rates and loan fees are subject to change without notice. Following the closing of the home purchase, no further principal or interest payments will be required as long as one borrower occupies the home as their primary residence and adheres to all HUD guidelines of loan. Borrower must remain current on property taxes, homeowner’s insurance, HOA dues, and maintain the property. The cost of any reverse mortgage loan depends upon how long the loan is kept and how much the property appreciates in value. Generally, the effective cost decreases across the life of the loan.
Benefits of using a Certified Aging-In-Place Specialist (CAPS)
The Certified Aging-in-Place Specialist (CAPS) designation was developed by the National Association of Home Builders (NAHB) Remodelers™ Council, in collaboration with the AARP, NAHB Research Center and NAHB Seniors Housing Council.
A CAPS is a certified professional who has been trained on the unique needs of seniors in order to modify homes for them to live safely and comfortably in their maturing years while still maintaining a familiar environment. A reverse mortgage can be a great source of cash flow to provide the cash they need to fund upgrading their home so they can afford to update their home.
Modernization and Remodeling
Modernization isn’t the only need for retirees to upgrade, but oftentimes they need to renovate so they can continue to live at home. It’s far more cost effective to live at home and get in-home care than it is to live in a long-term care facility. Medicare will help seniors pay for living in a nursing home, but tends to be a lot harder to get government assistance for upgrading a home.
Age 55+ High-Tech Home Improvement Wants
- 80% To Reduce Their Home Expenses Such As Smart Thermostats Or Apps To Control Appliances.
- 76% To Monitor Their Health At Home, Such As Seniors, Alerts, Or Medication Reminder Apps.
- 67% Interested In Optimize Their Health Air Purification Or To Improve Sleep
- 64% Connect Them With Their Family Such As Video Chat Interactive Devices
- 58% Help Maintain Their Home With Cleaning Robots Or Heated Driveways
Age 55+ Upgrade Wants
- Swing Out Corner Cabinets
- Roll-Out Trays To The Bottom Of Base Cabinets
- Induction Cook Tops
- Sensors On Beds
- Ergonomic Bathrooms – Walk-In Showers And Tubs
- Widen Doorways
- Remove Steps
- Open Shelves
- Wall-Mounted Sinks
- Non-Slip floors
- Grab Bars That Do Double Duty
- Dual Purpose Grab Bars
SOURCE: Home in Retirement: New Freedom, New Choices – A Merrill Lynch Retirement Study conducted in partnership with Age Wave – Page 16)
