Reverse Mortgage Analysis

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prepared 6/25/2014 by:

720-407-6330

askmas@gmail.com

prepared for: Ike Kutter

Mark Schmidt

NMLS#: 846014

Reverse Mortgage Analysis

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0 Loan Officer NMLS #:

199325 846014 Loan Officer Company NMLS #:

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General Information About Reverse Mortgages

What is a Reverse Mortgage?

A Reverse Mortgage is a federally regulated program for homeowners, aged 62 and older. It allows

the equity in your home to pay you rather than you paying for the home.

What is a Government Insured HECM program?

HECM stands for Home Equity Conversion Mortgage. It is a federally insured and guaranteed

program. The HECM is a safe way for you to access the equity in your home without ever making a

mortgage payment.

How is this Program “safe” for Senior Homeowners?

No matter what happens in the economy, how much money you receive, or how long you live in your

home you will never be required to make a mortgage payment. In addition, no matter what happens to

your lender or your home’s value you have guaranteed access to your money .

Who owns the home if I take a Reverse Mortgage?

You own the home. However, you pledge the home as collateral.

What happens if, in the future, the Loan exceeds the Value of the Home?

Your Reverse Mortgage will continue - thanks to the federal insurance. The line of credit will still be

available and monthly disbursements you may have set up, will still be sent to you.

How are Reverse Mortgages different today?

Today's reverse mortgages are highly regulated by State and Federal laws to make them safe and to

protect you. Among others, the following regulations apply:

- You retain title of the home.

- No equity share is allowed, meaning the lender does not slowly take over your home.

- Fees and costs are federally regulated.

How does a Reverse Mortgage compare to a Conventional Mortgage?

In a conventional forward mortgage, you make monthly payments to the bank eventually paying off

the mortgage over time. With a reverse mortgage you receive cash from your lender, as lump sum

upfront, as monthly installments or as a line of credit that grows over time. As long as you live in your

home you never have to pay off a single dollar of the loan.

What restrictions apply to the cash I receive from a Reverse Mortgage?

It is your money and you can use it the way you want. It’s non-taxable and does not affect Social

Security payments. We do recommend that you talk to a competent financial advisor to determine the

effect on any other benefits you may be receiving.

When does a Reverse Mortgage become due and what happens then?

When you no longer live in your home or when you pass away, the reverse mortgage becomes due.

You or your heirs have two options:

1) Pay off the reverse mortgage including the accrued interest and retain ownership .

2) Give up ownership of the home and receive the difference between the net sales proceeds and the

loan balance. You will not be liable for any shortfall if the sales proceeds do not cover the loan .

What are my obligations under a Reverse Mortgage?

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With a Reverse Mortgage you retain title to your home. This means that you also have all your

obligations as a home owner. You are responsible for home owner taxes and insurances.

Your Reverse Mortgage

Based on the information you have provided, you are eligible to receive an estimated $270,979 in proceeds from the government insured HECM Reverse Mortgage.

You May Choose How You Want to Receive the Proceeds

You can decide how you want to receive the proceeds from the Reverse Mortgage : 1. Lump Sum Cash at Closing:

2. Line of Credit:

3. Monthly Cash Proceeds for Life: 4. Or a combination of the three

The following pie graph illustrates a sample of the Reverse Mortgage and also gives an overview over fees, costs and reserves. Feel free to ask me to calculate for you another scenario.

The pie chart shows you the benefits and costs of your Reverse Mortgage.

The Value of your Home: $550,000

The total pie represents your home against which you borrow.

Line of Credit: $270,979

The Line of Credit will grow over time.

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Financing Fees: $8,421

These include several third party fees including legal fees, registration fees, and State and County

taxes for registration. The origination fee of $6,000 is also part of the Financing Fees. The origination

fees covers my company's expenses to originate, process and close the Reverse Mortgage and my

compensation. All the fees are listed in detail in the Good Faith Estimate. Insurance fees and

financing fees are paid for with the proceeds of your Reverse Mortgage, so you won't have to pay for

them when you take out the Reverse Mortgage. Also all fees are federally regulated.

Insurance Fees: $2,750

This may be the best insurance you ever paid for. It is for the mandatory federal insurance that

protects you and your estate in case the Reverse Mortgage exceeds the property value.

Equity Reserves: $267,850

This is part of the value of your property that cannot be touched when you take a Reverse Mortgage.

It is part of your equity.

Servicing Reserves: $0

Servicing Reserves are set-asides that will cover the servicing of your Reverse Mortgage. Servicing

means sending you cash from the Reverse Mortgage when you ask for it, providing you monthly

statements and assisting you with ongoing questions regarding the Reverse Mortgage. The cost for

servicing is $0 per month. Important: Only when the servicing is performed, will the monthly

servicing fee be charged against these reserves. The unused servicing reserves are your equity, they

are just under lock.

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Your Reverse Mortgage Over Time

The main strength of a Reverse Mortgage is that it is a financial instrument for the long-term. It is for

that reason that I have prepared some charts that illustrate a plausible future scenario.

Line of Credit

While in the true sense of the word the Reverse Mortgage is not a savings account, you may look at

the funds left in the Line of Credit of a HECM the same way you look at a savings account, with the

significant difference that the Reverse Mortgage "pays" higher interests and that the full line of credit

is government protected. Also the growth of the Line of Credit is not subject to taxation.

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Your Equity

With a Reverse Mortgage you retain ownership of your home. However you accrue the outstanding

balance of the Reverse Mortgage. The difference between the value of your home and the

outstanding balance is your equity. This is the amount that you would receive in case you sold the

home, or also the amount your estate would get in case you passed away.

The amount of the retained equity changes based on the development of the property value, interest

rates, advances received and other factors.

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Cost of the Reverse Mortgage

The APR or annual percentage rate reflects the true cost of any loan in a cash flow analysis . This

chart assumes that all the proceeds of the Reverse Mortgage were taken out at the closing. It clearly

demonstrates that a Reverse Mortgage is expensive on the short term, but also that it is very

competitive on the long run.

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About this Analysis

The calculations in this analysis are based on your date of birth, 2/2/1952. Your home is located in

DOUGLAS County, CO and the estimated value is $550,000.

The analysis is for a HECM Libor 2.375. The rate is monthly adjustable, based on the 1-month

LIBOR. The margin is 2.38% and the rate can never exceed 7.53%.

The calculations also assume an annual growth rate of 4% for the value of your home.

Final rates and proceeds may change. Also, if underlying assumptions change, then the numbers in

the analysis will change.

Frequently Asked Questions

Does the lender take title to my property?

No, you retain the same ownership and title that you have today. The lender puts a lien on the

property, just as they would with a regular forward mortgage, which is paid off when you sell your

property, or when you pass and your heirs inherit and they can pay off the loan with another loan or

other funds.

When does the Reverse Mortgage need to be paid off?

When you sell the property or no longer occupy your home as your primary residence for a period of

12 months or longer.

What does the lender expect from me?

You must maintain the property in reasonably good condition. You must pay the property taxes and

the homeowners insurance and any homeowner's association dues you may have. And of course,

the lender expects you to continue to occupy the property.

I currently hold title in a Trust, can I keep it that way?

Yes you can but the lender and title company do require that they review the trust and it must be

approved. If you hold title in a trust you should let your Loan Officer know up front so he /she can get

a copy of the trust and have it reviewed immediately so that there are no surprises later. Most trusts

are prepared with lenders and their requirements in mind so they are not a problem but it is best to

know as early on as possible!

Will my heirs still receive an inheritance?

Yes, after the balance of your reverse mortgage is paid off, all remaining equity will go to your heirs.

One of the forms we provide you with before you close your loan is an amortization schedule so you

will always know the principal balance of your loan, year by year. How much equity will remain will

depend on such variables as how much money you draw, how long you stay in your home, home

appreciation, your home experiences, and interest rates (if you have a variable interest rate loan).

What's Next?

Call me at 720-407-6330 to schedule an appointment with you and your family.

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Originator Name: Borrower Name(s):

I/we attest that Mac 5 Mortgage provided a list of at least twelve (12) HUD-approved Counseling agencies, five (5) of which are located within the local area and/or state that I reside.* I/ We further attest that Mac 5 Mortgage did not recommend, steer or direct me to a particular counseling agency.

*Some states may have fewer than five HUD-approved counseling agencies. Mac 5 Mortgage

Ike Kutter

HUD Counseling Disclosure - List of HUD Approved Counselors

NATIONAL INTERMEDIARIES:

- Greenpath: 888-860-4167

- ClearPoint Financial Solutions: 877-877-1995 - CredAbility Nonprofit Credit Counseling & Education: 866-616-3716

- Springboard: 800-947-3752

- Money Management International (MMI): 877-908-2227 - National Foundation for Credit Counseling (NFCC): 866-698-6322 - National Council on Aging (NCOA): 800-510-0301 - Neighborhood Reinvestment Corporation: 888-990-4326

- Homefree: 301-891-8423

DOUGLAS COUNTY HOUSING PARTNERSHIP 9350 HERITAGE HILLS CIRCLE

LONETREE, CO 80124-5518 (303) 784-7857

Agency Id: 84681

NORTHEAST DENVER HOUSING CENTER 1735 GAYLORD ST

DENVER, CO 80206-1208 (303) 377-3334 ext 229 Agency Id: 80213

CITY OF AURORA COMMUNITY DEVELOPMENT DIVISION 9898 E COLFAX AVE

AURORA, CO 80010-5012 (303) 739-7914

Agency Id: 81141

BROTHERS REDEVELOPMENT, INC. 2250 EATON ST

EDGEWATER, CO 80214-1276 (303) 202-6340

Agency Id: 80211

COMMUNITY RESOURCES AND HOUSING DEVELOPMENT CORPORATION 7305 LOWELL BLVD UNIT 200

WESTMINSTER, CO 80030-1709 (303) 428-1448

Agency Id: 82127

LOCAL AGENCIES: NATIONWIDE AGENCIES:

QUICK CERT

1831 E 71ST STREET, STE. 120 TULSA, OK 74136

(888) 383-8885 Agency ID: 84311

SMART MONEY HOUSING 3510 W. FRANKLIN BLVD. CHICAGO, IL 60624 (800) 403-3807 Agency ID: 84399

CAMBRIDGE CREDIT COUNSELING CORP. 67 HUNT STREET

AGAWAM, MA 01011 (888) 764-7460 Agency ID: 81323 DEBT HELPER

1325 N CONGRESS AVE., #201 WEST PALM BEACH, FL 33401 (800) 920-2262

Agency ID: 83706

Ike Kutter Date

CounselorList__AAG

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Total Annual Loan Cost Rate

Borrower Name/Case Number: Ike Kutter / Refinance: No

LOAN TERMS MONTHLY LOAN CHARGES

Age of Youngest Borrower: Property Value:

Initial Interest Rate: Monthly Advance: Length of Term:

Servicing Fee: Mortgage Insurance: Shared Appreciation: OTHER CHARGES None 1.25% annually $0.00 63 $0.00 $0.00 $270,978.92 $550,000.00 2.529% $0.00

Initial Line Of Credit: Initial Advance:

Lien Payoffs with Reverse Mortgage:

INITIAL LOAN CHARGES

Mortgage Insurance Premium: Other Closing Costs:

POC Closing Costs: Annuity Cost: $2,750.00 $0.00 $8,421.08 $475.00 REPAYMENT LIMITS

Net proceeds estimated at 93% of projected home sale

Total Annual Loan Cost Rate

2 Years 11 Years 21 Years 29 Years Disclosure Period (Years)

Appreciation Rate

8.177% 4.577% 4.203% 4.090%

0%

8.177% 4.577% 4.203% 4.090%

4%

8.177% 4.577% 4.203% 4.090%

8%

The cost of any reverse mortgage loan depends on how long you keep the loan and how much your house appreciates in value. Generally, the longer you keep a reverse mortgage, the lower the total annual loan cost rate will be.

This table shows the estimated cost of your reverse mortgage loan, expressed as an annual rate. It illustrates the cost for four loan terms: 2 years, half of life expectancy for someone your age, that life expectancy, and 1.4 times that life expectancy. The table also shows the cost of the loan, assuming the value of your home appreciates at three different rates: 0%, 4% and 8%.

The total annual cost rates in this table are based on the total charges associated with this loan. These charges typically include principal, interest, closing costs, mortgage insurance premiums, annuity costs and servicing costs (but not disposition costs--costs when you sell the home).

The rates in this table are estimates. Your actual cost may differ if, for example, the amount of your loan advances varies or the interest rate on your mortgage changes. You may receive projections of loan balances from counselors or lenders that are based on an expected average mortgage rate that differs from the initial interest rate .

SIGNING AN APPLICATION OR RECEIVING THESE DISCLOSURES DOES NOT REQUIRE YOU TO COMPLETE THIS LOAN

Date Ike Kutter

Page 1 of 1 Printed: 6/25/2014

2008-2014 ReverseVision, Inc. Loan Officer Company NMLS #:

846014 199325 Loan Officer NMLS #:

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Amortization Schedule - Annual Projections

Borrower Name/Case Number: Ike Kutter / Refinance: No

Age of Youngest Borrower: Interest Rate (Expected / Initial): Maximum Claim Amount: Initial Principal Limit:

Financed Closing Costs:

63

$11,171.08 5.105% / 2.529% $550,000.00 $282,150.00 $0.00 $0.00

Initial Property Value: Beg. Mortgage Balance: Expected Appreciation: Monthly Payment: Monthly Servicing Fee: Mortgage Insurance (MIP)

$550,000.00 4.000% $0.00 $11,171.08 $270,978.92 $0.00 1.25%

NOTE: Actual interest charges and property value projections may vary from amounts shown. Available credit will be less than projected if funds withdrawn from line-of-credit.

Initial Line Of Credit: Initial Advance:

Lien Payoffs with Reverse Mortgage:

Yr

Annual Totals End of Year Projections

Age SVC Fee

Cash Payment

MIP Interest Loan

Balance Line Of Credit Property Value Equity Rate

1 63 $0 $0 $144 5.105% $587 $11,902 $288,710 $572,000 $559,623

2 64 $0 $0 $153 5.105% $626 $12,681 $307,602 $594,880 $581,724

3 65 $0 $0 $163 5.105% $667 $13,511 $327,729 $618,675 $604,690

4 66 $0 $0 $174 5.105% $710 $14,395 $349,174 $643,422 $628,553

5 67 $0 $0 $185 5.105% $757 $15,337 $372,022 $669,159 $653,348

6 68 $0 $0 $197 5.105% $806 $16,340 $396,365 $695,925 $679,110

7 69 $0 $0 $210 5.105% $859 $17,409 $422,301 $723,762 $705,878

8 70 $0 $0 $224 5.105% $915 $18,548 $449,933 $752,713 $733,690

9 71 $0 $0 $239 5.105% $975 $19,762 $479,374 $782,821 $762,584

10 72 $0 $0 $254 5.105% $1,039 $21,055 $510,742 $814,134 $792,604

11 73 $0 $0 $271 5.105% $1,107 $22,433 $544,162 $846,700 $823,792

12 74 $0 $0 $289 5.105% $1,179 $23,901 $579,768 $880,568 $856,192

13 75 $0 $0 $308 5.105% $1,256 $25,465 $617,705 $915,790 $889,851

14 76 $0 $0 $328 5.105% $1,339 $27,131 $658,124 $952,422 $924,816

15 77 $0 $0 $349 5.105% $1,426 $28,906 $701,188 $990,519 $961,138

16 78 $0 $0 $372 5.105% $1,519 $30,798 $747,069 $1,030,140 $998,867

17 79 $0 $0 $396 5.105% $1,619 $32,813 $795,953 $1,071,345 $1,038,057

18 80 $0 $0 $422 5.105% $1,725 $34,960 $848,036 $1,114,199 $1,078,764

19 81 $0 $0 $450 5.105% $1,838 $37,248 $903,526 $1,158,767 $1,121,044

20 82 $0 $0 $479 5.105% $1,958 $39,685 $962,648 $1,205,118 $1,164,958

21 83 $0 $0 $511 5.105% $2,086 $42,282 $1,025,638 $1,253,322 $1,210,566

23 85 $0 $0 $580 5.105% $2,368 $47,996 $1,164,252 $1,355,594 $1,307,122

25 87 $0 $0 $658 5.105% $2,688 $54,483 $1,321,601 $1,466,210 $1,411,252

27 89 $0 $0 $747 5.105% $3,051 $61,846 $1,500,215 $1,585,853 $1,523,532

29 91 $0 $0 $848 5.105% $3,464 $70,205 $1,702,969 $1,715,258 $1,644,579

31 93 $0 $0 $963 5.105% $3,932 $79,693 $1,933,124 $1,855,223 $1,775,056

33 95 $0 $0 $1,093 5.105% $4,463 $90,463 $2,194,386 $2,006,610 $1,915,671

35 97 $0 $0 $1,241 5.105% $5,066 $102,689 $2,490,957 $2,170,349 $2,067,184 37 99 $0 $0 $1,408 5.105% $5,751 $116,568 $2,827,609 $2,347,449 $2,230,407

Date Ike Kutter

Page 1 of 1 2008-2014 ReverseVision, Inc.

Printed: 6/25/2014 Loan Officer Company NMLS #:

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Reverse Mortgage Comparison

Mark Schmidt, Mac 5 Mortgage

225 Union Blvd. #350, Lakewood, CO 80228 Phone: 720-407-6330

From:

Estimates For: Ike Kutter Date Of Birth: 2/2/1952

Closing Date: 8/25/2014 (estimate)

Rates and Fees

HECM Cap 5 Monthly Libor B Fixed B 4.75 Fixed B 4.99

N/A 2.500% 2.375% Margin N/A 4.750% 2.654% 2.529%

Initial Interest Rate 4.990%

4.750% 5.230%

5.105%

Expected Interest Rate 4.990%

1.25% 1.25%

1.25%

Ongoing Mortgage Insurance Rate 1.25%

4.750% 12.654%

7.529%

Cap on Interest Rate 4.990%

N/A 3.904%

3.779%

Initial Line of Credit Growth N/A

Calculation

$550,000.00 $550,000.00

$550,000.00

Home Value $550,000.00

$550,000.00 $550,000.00

$550,000.00

Maximum Claim Amount $550,000.00

$292,050.00 $273,900.00

$282,150.00

Principal Limit $292,050.00

$2,750.00 $2,750.00

$2,750.00

- IMIP $2,750.00

$3,500.00 $6,000.00

$6,000.00

- Origination Fee $1,500.00

$2,383.03 $2,383.03

$2,421.08

- Other Costs $2,383.03

$0.00 $0.00

$0.00

+ Credits $0.00

$283,416.97 $262,766.97

$270,978.92

Remaining Principal Limit $285,416.97

$0.00 $0.00

$0.00

- Liens and Mortgages $0.00

$0.00 $0.00

$0.00

- Repair Set Aside $0.00

$0.00 $0.00

$0.00

- 1st Year Tax and Insurance Set Aside $0.00

$8,633.03 $11,133.03

$11,171.08

Total Mandatory Obligations $6,633.03

2.96% 4.07%

3.96%

% of Principal Limit 2.28%

$175,230.00 $164,340.00

$169,290.00

Initial Disbursement Limit $175,230.00

60.00% 60.00%

60.00%

% of Principal Limit 60.00%

$0.00 $0.00

$0.00

- Additional Tax and Insurance Set Aside $0.00

$283,416.97 $262,766.97

$270,978.92

Available Principal Limit $285,416.97

Available Funds and Requested Payments

$166,596.97 $153,206.97

$158,118.92

Max Available Cash at Closing $168,596.97

$166,596.97 $0.00

$0.00

Cash Request $168,596.97

N/A $262,766.97

$270,978.92

Total Line Of Credit N/A

$0.00 $153,206.97

$158,118.92

Line Of Credit Available 1st Year $0.00

$0.00 $109,560.00

$112,860.00

Line Of Credit Available After 1st Year $0.00

$0.00 $1,553.50

$1,578.80

Available Monthly Tenure Payment 1st Year $0.00

$0.00 $0.00

$0.00

Monthly Payment 1st Year $0.00

$0.00 $1,553.50

$1,578.80

Available Monthly Tenure Payment $0.00

N/A $0.00

$0.00

Monthly Payment Request N/A

$175,230.00 $11,133.03

$11,171.08

Initial Loan Balance $175,230.00

$116,820.00 $0.00

$0.00

Unavailable Principal Limit $116,820.00

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Rates and Fees

Fixed B 5.06 Fixed B 5.180

Margin N/A N/A

Initial Interest Rate 5.060% 5.180%

Expected Interest Rate 5.060% 5.180%

Ongoing Mortgage Insurance Rate 1.25% 1.25%

Cap on Interest Rate 5.060% 5.180%

Initial Line of Credit Growth N/A N/A

Calculation

Home Value $550,000.00 $550,000.00

Maximum Claim Amount $550,000.00 $550,000.00

Principal Limit $292,050.00 $282,150.00

- IMIP $2,750.00 $2,750.00

- Origination Fee $0.00 $0.00

- Other Costs $2,383.03 $2,383.03

+ Credits $0.00 $0.00

Remaining Principal Limit $286,916.97 $277,016.97

- Liens and Mortgages $0.00 $0.00

- Repair Set Aside $0.00 $0.00

- 1st Year Tax and Insurance Set Aside $0.00 $0.00

Total Mandatory Obligations $5,133.03 $5,133.03

% of Principal Limit 1.76% 1.82%

Initial Disbursement Limit $175,230.00 $169,290.00

% of Principal Limit 60.00% 60.00%

- Additional Tax and Insurance Set Aside $0.00 $0.00

Available Principal Limit $286,916.97 $277,016.97

Available Funds and Requested Payments

Max Available Cash at Closing $170,096.97 $164,156.97

Cash Request $170,096.97 $164,156.97

Total Line Of Credit N/A N/A

Line Of Credit Available 1st Year $0.00 $0.00

Line Of Credit Available After 1st Year $0.00 $0.00

Available Monthly Tenure Payment 1st Year $0.00 $0.00

Monthly Payment 1st Year $0.00 $0.00

Available Monthly Tenure Payment $0.00 $0.00

Monthly Payment Request N/A N/A

Initial Loan Balance $175,230.00 $169,290.00

Unavailable Principal Limit $116,820.00 $112,860.00

The above numbers are calculated based upon the specified interest rates and the estimated closing date noted above. Changes in interest rates and/or changes in actual closing dates may cause the amounts available to be higher or lower than stated.

Date Ike Kutter

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Estimated Closing Costs

This is not a Good Faith Estimate or a Truth-in-Lending Disclsoure Statement required by federal law. If you make an application with us, your Good Faith Estimate and Truth-in-Lending Disclosure Statement will be provided to you in the opening package. This is not a commitment to lend, nor is it a rate lock, pre-qualification or pre-approval. This worksheet is intended to assist you in evaluating a loan or home purchase using estimated closing and property costs . Closing and settlement costs, reserve deposits, interest rate and Annual Percentage Rate (APR) are subject to change and the estimates shown below may be more or less depending on factors such as down payment, property type, and occupancy. Housing costs will vary depending on location, homeowner's association dues, local and state fees, taxes, and hazard and mortgage insurance. Charges from third parties, which may include Lender 's affiliates, will be passed through at the actual cost charged by the third party. You may wish to complete these estimated charges in considering the total cost of your mortgage.

Estimate of Closing Costs Worksheet

Ike Kutter

Prepared For: Property Address:

Date: June 25, 2014 Estimated Home Value: $550,000.00

Estimated Amount POC Amount

Finance Charges

Broker Compensation (paid by lender to broker: $879.72)

$125.00

Document preparation

$18.00

Flood certification

$125.00

HECM counseling fee

$2,750.00

Mortgage Insurance Premium

$6,000.00

Origination Fee

$50.00

Repair administration

$250.00

Settlement or closing fee

Other Charges $475.00 Appraisal fee $13.08 Credit report $1,600.00

Lender’s title insurance

$240.00

Recording charges mortgage

Total Estimated Settlement Costs $11,646.08

$11,171.08 $475.00

EstimateOfClosingCosts

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2008-2014 ReverseVision, Inc.

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Preparing for Your Counseling Session

The decision to get a reverse mortgage is an important one. The Department of Housing and Urban

Development (HUD) and the Federal Housing Administration (FHA) want to ensure you are able to make an

informed decision and that you are able to choose a course of action that will meet your needs. For this

reason, housing counseling for HUD’s Home Equity Conversion Mortgage (HECM) is required. The

purpose of this overview is to provide introductory information on counseling and the HECM program, to

help you prepare for your counseling session. After your counseling session, you will have a better

understanding of the features of a reverse mortgage; the impact a reverse mortgage will have on your

particular circumstances; and whether services or programs other than a reverse mortgage might better meet

your needs.

What You Can Expect from Your Reverse Mortgage Counselor

Understanding what to expect from reverse mortgage counselors is an important first step in setting your

expectations for your counseling session. Remember, only you can decide if a reverse mortgage is right for

your situation. The counselor provides information to assist you in making that decision.

·

The counselor is responsible for helping you understand reverse mortgages and the appropriateness of

a reverse mortgage to meet your particular need as well as alternatives to a reverse mortgage.

·

Reverse mortgage counselors will discuss your financial and other needs for remaining in your home,

the features of a reverse mortgage and how it works, your responsibilities with a reverse mortgage, the

impact of a reverse mortgage on you and your heirs, and the availability of other assistance you may

need.

·

The job of the counselor is not to “steer” or direct you towards a specific solution, a specific product,

or a specific lender.

·

Counselors will help you understand your options and their impacts.

Reverse mortgage counselors are required to follow specific practices, which are designed to ensure you

receive quality counseling services and are protected against fraud and abuse. HUD requires that HECM

counselors do the following:

·

Send you required materials ( i.e., this packet) prior to your counseling session

·

Follow established protocols when conducting the counseling session

·

Follow-up with you after the session has concluded.

PrepareForCounseling

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What You Can Expect from the Reverse Mortgage Counseling Process

Step 1 - Schedule an appointment. The counseling process begins when you schedule your appointment

for a counseling session. You must schedule an appointment directly with the counseling agency. Your

lender cannot initiate or participate in the counseling session. This session is conducted in person or over

the telephone; however, HUD advises that, if possible, you meet with your counselor face-to-face to gain

greater benefit from your session.

Step 2 - Counselor will contact you and send information.

Once you have set up an appointment, the

agency sends you a packet of information so that you can prepare for your session. Before you begin, you

should also know that some agencies charge a fee for counseling; if you cannot afford to pay this fee you

should discuss your inability to pay with the agency at the outset of your session to understand your options.

Step 3 - The counselor will collect from you:

Your name, contact and other key information, including

your interest in obtaining a reverse mortgage, for the counseling session.

Step 4 - Counseling session: The counselor will discuss with you your needs and circumstances; provide

information about reverse mortgages and other alternative types and sources of assistance that might be

available to you.

Step 5 - Certificate of Completion:

Once you complete your session and you and your counselor are

comfortable that you understand the essentials of a reverse mortgage, the counselor will issue a certificate,

which verifies for a lender that you have successfully completed counseling.

Step 6 - Follow-up:

Your counselors will follow-up with you to learn if you need further assistance and to

understand the outcome of your counseling session. You may also call your counselor to seek further

assistance after your session.

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How a Reverse Mortgage Works

Before you begin your counseling session, it is helpful if you understand a few basics about a reverse

mortgage.

Reverse mortgages enable homeowners age 62 or older to convert their home’s equity into available cash - a

lender advances you money (the loan) based upon the equity in your home. The amount of money you are

eligible to receive generally depends upon the amount of equity in your home and your age at the time you

get the loan.

With a reverse mortgage, you remain the owner of your home. As with any home, you must continue to pay

property taxes and homeowner’s insurance. You are also responsible for maintaining your home in good

condition.

You will not have to repay your loan balance for as long as you live in your home. You must repay a HECM

loan in full when the last surviving borrower dies or sells the home. You can choose to pay off the loan

through the sale of the property or prepayment of the loan at any time without penalty.

Conveyance of the mortgaged property by will or operation of law to the estate or heir after mortgagor's

death: When a reverse mortgage becomes due and payable as a result of the borrower's death and the

property is conveyed by will or operation of law to the estate or heirs (including a surviving spouse who is

not on title and therefore not obligated on the HECM note) that party (or parties if multiple heirs) may

satisfy the HECM debt by paying the lesser of the mortgage balance or 95% of the current appraised value of

the property.

Types of Reverse Mortgages

There are three types of reverse mortgages shown in the chart below.

Single purpose

reverse mortgage

Typically offered by state and local government agencies to

be used in only one specific way, for example, home repairs

Proprietary

reverse mortgage

Can be used for any purpose and may be suitable for

borrowers with high cost homes

Can be used for any purpose and is insured by the Federal

government.

Home Equity Conversion Mortgage

(HECM)

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Payment Plan Options

There are several types of HECM loan plans available, including monthly and annually adjusting interest

rate loans as well as fixed interest rate loans. Borrowers can decide to take a line of credit with flexible draw

down options, a term loan with fixed monthly payments for a specified number of years, or a tenure plan

with guaranteed payments for life or a combination of these options.

Choosing a Reverse Mortgage to Meet your Needs

HECM payment plans are flexible. The best payment plan for you will depend on your current and future

financial needs and circumstances. For example:

If you have a small balance on your existing mortgage and would like to pay it off with the reverse

mortgage

, a line of credit plan would allow you to draw all the funds at loan closing and pay off the

current mortgage.

If you need a set amount of money every month to supplement your income to help meet monthly

expenses

, then a tenure or term payment plan might be a suitable option for you.

If you know you will have some large health care expenses in the near future and want to have the

funds available when needed

, a line of credit may also meet your needs.

Your reverse mortgage counselor will discuss your goals for a reverse mortgage with you and will explain

the different options available to help meet your needs.

Costs to Obtain HECM

Costs associated with HECMs are generally higher than those for “forward” mortgages used to purchase a

home. Although, the cost categories are the same as you would see for a traditional “forward” mortgage.

These costs include lender fees to originate the mortgage, servicing fees for ongoing administration of the

loan and interest on the money you use from the loan. There are also closing costs, which include all the

usual and customary expenses associated with obtaining a mortgage, for example, the appraisal, title

searches and insurance. HECMs also include a fee for FHA mortgage insurance.

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Impact on Tax/Social Service Benefits

Reverse mortgage loan advances are not taxable and do not affect Social Security or Medicare benefits.

However, you must be careful that any loan proceeds you retain do not exceed the monthly liquid resource

limits for Supplemental Security Income (SSI) and Medicaid, which may be impacted by your HECM

payments.

Alternatives to a Reverse Mortgage

Your HECM counselor will also help you consider options available to meet your needs other than a reverse

mortgage. These options include:

·

selling your home and moving to a more suitable residence

·

renting as well as other financial options

·

support services and public benefits that may be available to you in your community.

HUD encourages you to learn as much as possible about your options, before you decide on a reverse

mortgage. Listed below are resources you can access to learn more about reverse mortgages and elder care.

AARP’s web site at

www.aarp.org/money/revmort <http://www.aarp.org/money/revmort> provides more

information on reverse mortgages and calculators that will provide general estimates of the amount of money

you might receive from a reverse mortgage. You may also contact AARP at 1-800-424-3410.

The

National

Reverse

Mortgage

Lenders

Association

provides

consumer

information

at

www.reversemortgage.org/default.aspx

<http://www.reversemortgage.org/default.aspx>

and

can

also

be

reached by calling 1-866-264-4466.

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Use Your Home

to Stay at Home ™

The official reverse mortgage consumer booklet

approved by the U.S. Department of Housing

& Urban Development

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he National Council on Aging (NCOA) is committed to helping older

persons to maximize all resources, public and private, so that they can

be as independent as possible in the residence of their choice.

As people grow older, more and more of them face health or economic challenges

that can make it more difficult for them to continue to live in their own homes.

For many seniors, their homes are their biggest financial asset. This booklet is

designed to help older adults to understand and assess the potential range

of options, including reverse mortgages, that may be available to them for paying

for the services and supports they may need.

-James Firman, CEO

The National Council on Aging is a nonprofit service and advocacy organization

headquartered in Washington, DC. NCOA is a national voice for older

Americans-especially those who are vulnerable and disadvantaged-and the

community organizations that serve them. It brings together nonprofit

organizations, businesses and government to develop creative solutions that

improve the lives of all older adults. NCOA works with thousands of

organizations across the country to help seniors find jobs and benefits, improve

their health, live independently and remain active in their communities. For more

information, visit www.ncoa.org.

You are free to copy, distribute, and transmit this publication

for counseling-related purposes.

The limits for reuse or distribution are spelled out at

http://creativecommons.org/licenses/by-nd/3.0/

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■ Decide if staying at home is right for you.

■ Understand the different ways you can pay for help at home.

■ Know where to go for more information.

Overview

L

ike most Americans, you probably want

to stay in your home as you grow older.

However, as it gets harder to do things on

your own, you may need a helping hand with

everyday tasks. It can be costly to pay for help at

home, along with home modifications and other

health needs. For many people, these extra costs are

a real burden. Older Americans often hold onto their

home as a nest egg in case they need extra money.

But when that “rainy day” arrives, how do you tap

the equity in your home? Some people may tell you

to sell the house and move to assisted living or a

nursing home.There is another option. If you’ve

owned your house for many years, it could be worth

a lot more than you paid to buy it. Home equity is the

difference between the appraised value of your home

and what you owe on any mortgages. A reverse

mortgage can help you convert some of your home equity into cash and continue

to live at home for as long as you want.

Using the equity in your home can seem like a good idea. But

is it right for you? It is a decision you should consider carefully,

because the house may be your most valuable financial asset. This booklet will

help you understand the benefits and challenges of this funding option. After

reading this booklet, you should be better able to:

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People who need help at home face many challenges. An ongoing health

problem can make it hard to know how much longer you can continue to live at

home. You should also be aware of government benefits and community

programs for seniors, and how a reverse mortgage may affect your eligibility for

these programs.

This booklet will give you the tools you need to make wise choices. It will

help you ask the right questions and plan ahead so that you can stay at home as

long as possible.

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Challenges of

Aging in Place

iving at home can become difficult as you grow older. Ongoing health

conditions such as arthritis or poor eyesight can make it hard to do

household chores, drive a car, or climb

stairs safely. People who are

forgetful may not take their medicine on time. Without extra help, older people

often struggle with everyday tasks after a serious heart attack, stroke, or fall.

In the past, when an older person had trouble living alone, that was a signal

that it was time to move in with family or go to a nursing home. But for most

people this is no longer the case. Today, you can receive a wide range of services

and supports in your home or community. New advances in medicine and

technology are helping even people with complex medical problems to stay in

their own homes for many years. This is often called “aging in place.”

Choosing to live in your home when you need extra help can be a big

decision. There are many practical and financial factors to consider. You will

need to balance health and safety issues with your desire for independence and a

familiar setting. It is crucial to plan ahead as much as possible. Answering these

questions can help you get started:

■ Will living at home work for me?

■ What resources do I have to help me stay at home?

■ How long can I continue to live at home?

It is important to remember that every situation is unique. What may work for

one person might not be the best choice for someone else.

L

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Will Living at Home Work for Me?

First, make sure that your home is safe and comfortable, and fits your needs.

Check that the services you want are available in your area. If it is difficult for

you to live by yourself, you should consider other options, such as a retirement

community or assisted living.

The right housing for you

Where you live and the house itself can keep you from aging in place. Think

about these factors to see if staying in your own home makes sense:

■

Changing needs

-A house that was ideal 30 years ago may now be too

difficult to handle alone. Older houses often need a lot of costly maintenance,

improvements, or repairs.

■

Safety

-A house with cluttered furniture or steep stairs is an accident waiting

to happen. Unsafe neighborhoods may make you afraid to go shopping or attend

social activities.

■

Isolation

-A trip to the grocery store, pharmacy, or place of worship can be a

problem when you cannot drive. It is easy to feel lonely or trapped when family

and friends are far away.

■

Ease of use

-If you need a walker or a wheelchair, it helps to have a bedroom

on the first level, grab bars in the bathroom, and ramps for the entrance of the

house.

You can fix some of these conditions by modifying your home. If you want to

live in a safer neighborhood or closer to your family and friends, you will have to

move.

Adequate help

Most older people who have health problems get help in their own homes.

Family or friends who give this help are called caregivers. There are also many

professional services. A homemaker can provide transportation, do household

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chores, and assist with daily activities. A nurse can check your medications and

give medical care, while a therapist can provide rehabilitation in your home.

Adult day centers may offer social activities, health checks, and rehabilitation

therapies. They provide a safe and fun place to be while family caregivers are at

work or take a break from caregiving.

Relying on paid services may not work if you do not want a stranger in your

home. It can also be hard to find the services you want at a price you can afford.

Without good quality and reliable help, people with health issues often find it

hard to live at home.

Cost of supportive services

When you get help at home, usually someone comes into your house from a

home health agency. Professional services in your home can be expensive. Some

service providers charge by the hour, while others charge for each home visit.

While services in the home and community may cost less than in a nursing home,

these expenses can add up over time. If you need a few hours of help from a

home health aide in the morning and at night, you could easily spend $76 per day,

or $2,280 per month.

Median national cost of services, 2012

Homemaker: $18/hour

Home health aide: $19/hour

Adult day health care: $61/day

Assisted living: $3,300 per month

Nursing home: $200-$220/day

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You also may need to make changes to the house to make it easier and safer to

stay at home. Home modifications can range from a hundred dollars to install a

grab bar to thousands of dollars to install a lift or add a bathroom to the main

floor. Costs vary in different regions of the country. They tend to be higher in

areas where the cost of living is high.

What Resources Do I Have to Help Me

Stay at Home?

Look at all the resources you can use to help you live at home. You likely have

three major sources of help: support from family and friends, personal income

and assets, and the equity in your home.

Support from others

Most older Americans who have difficulty doing everyday tasks depend on

family and friends for help. Children can run errands, provide transportation, and

maintain the house. Neighbors may help with yard

work or home repairs. A spouse or adult children can also provide a high level of

loving care.

Family caregiving can be a rewarding experience. But think about this

carefully if you expect to rely on your spouse or children as your only source of

help. It can be very tiring to help someone every day, especially

if they have trouble walking or have Alzheimer’s disease. Caregivers may

develop health problems because of the strain of these activities. Working

caregivers may have to give up their job or cut the number of

hours they work to give help at home.

Personal finances

Paying for in-home services and other health-related expenses can quickly use

up a big part of a retirement nest egg. Review your finances carefully. They will

be an important part of your decision to remain at home. Your finances include

your income, savings, and investments.

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■ Estimate your household budget. Work out your income and living expenses,

along with the monthly cost of any loans and credit card debt. You also have to

budget for home repairs and maintenance, and keep up with insurance and tax

payments.

■ Keep an eye on cash flow. Make sure you have enough money readily available

each month to pay for expenses. Your need for help may vary as your health

changes.

If you have financial resources such as stocks, bonds, or property other than the

home, you could sell those assets to get more money now. If you own a life

insurance policy, you may be able to use part of the death benefit to pay for

supportive services (“accelerated benefit”). If you have very limited finances, you

may be eligible for government programs.

Home equity

Home equity is the difference between the appraised value of the home and

what you owe on any mortgages. If you’ve owned your house for many years, it

could be worth more than you paid to buy it. Tapping the equity in your home can

quickly give you extra cash for a ramp or lift, or to help pay day-to-day expenses.

A home loan may also be less costly than high interest rates from credit cards.

It can be a very emotional decision to tap home equity. Many people see their

house as a place to live, not as a resource to pay for everyday expenses. For some,

it is important to leave an inheritance for their children. You must balance your

desire to preserve home equity with the risk of not having enough funds to

continue to stay at home. Pinching pennies can lead to poor nutrition, health

complications, or a serious accident that can put you in the nursing home.

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Other Housing Options

Living with an ongoing health condition can be hard. You may need to

change your living situation when you:

■ Cannot take care of yourself or manage the home on your own anymore.

■ Have had several falls or other accidents.

■ Need round-the-clock supervision (such as in the later stages of Alzheimer’s

disease).

One option may be to live with your children. First, think about how this will

work. How easy will it be to live together? Will your kids have to make changes t

o their house, such as adding grab

bars or building a ramp? Who

will pay for expenses such as rent?

You may not want to move because

you are afraid of losing your

independence. However, today there

are many attractive housing choices

where you can get the help you need.

For example, senior housing makes

it easier to live independently by

offering services such as transportation and

social activities. In assisted living, you can

live in a private apartment and get help

with everyday activities. Continuing care

retirement communities (CCRCs), or life

care communities, offer a full range of services from independent living, to

assisted living, and nursing care.

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Your House

As A Resource

nce you decide to continue living at home, the next step is to make sure

that you have enough money to pay for the help you need. This section

describes your choices for tapping home equity. Typically, you would

take out a loan that uses your home as the collateral to guarantee that you will

repay the loan. To help you decide which option may be best for you, answer

these questions:

■ Why do I need the money?

■ How much cash can I get from my house for help at home?

■ Am I prepared to tap home equity?

The equity you have built up over many years should be used wisely. It is

important that you understand the costs, benefits, and risks of the different type of

loans.

Why Do I Need the Money?

Since home loans can be costly, you need to be clear about how you plan to

use the money. Some homeowners like to plan ahead by taking out a line of

credit. These funds give them the flexibility to pay for expenses as they arise.

Others want a lump sum to deal with a specific, one-time cost such as adding a

bathroom or paying off an existing mortgage.

How long you will need the loan will also make a difference in your decision.

Are you tapping home equity to solve an immediate problem? Or do you need

funds for many years to pay ongoing household expenses?When you take out a

loan to tap a portion of your home equity, you usually cannot use the remaining

equity for other needs until you pay off the loan. It is important to look at your

overall financial situation, or you may find yourself stuck with a loan that doesn’t

fit your changing needs.

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Short-term solutions for immediate needs

If you want to use home equity to deal with an emergency or for specific

problems that need attention right away, you can use several financial options.

Single purpose loans

Many states and communities offer special loans to help older homeowners

who are struggling to live at home. These loans are designed to meet specific

needs:

■ Home repair and improvement loans: Borrowers get a one-time, lump-sum

payment that can be used only for the specific repairs or improvements that each

program allows.

■ Property tax deferral loans: These programs allow older homeowners to defer

payment of some or all of their property taxes until they move out of the home.

Borrowers do not need to make payments on these single-purpose

loans for as long as they continue to live in the home.

Advantages

■ Single purpose loans usually cost less than conventional home equity loans.

■ You may not have to pay back all of the loan if you continue to live in the home

for a certain period of time.

Disadvantages

■ Most programs require borrowers to be at least 65 years old. Often, only

homeowners with low or moderate incomes can apply.

■ These loans may not be available where you live.

■ The remaining equity in your home may not be available to use for other needs.

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Conventional home equity loans

These loans can be useful if you are unsure how long you can continue to live

at home or how much help you will need. Conventional home equity loans can

also help families who have other assets they do not want to sell right away. Until

you have a good sense of what’s going on with your health situation, you can get

extra funds from these loans without paying large fees or making drastic changes.

There are two types of home equity loans:

■ Home equity line of credit: This loan works like a credit card. You can borrow

up to a certain limit for the life of the loan. During that time, you can withdraw

money as needed. As you pay off the principal, your credit revolves and you can

use it again.

■ Home equity loan: You receive the money in a lump sum. You pay off the loan

over a set amount of time, with a fixed interest rate and the same payments each

month.

With these loans, you will pay ‘points’, appraisal fees, closing costs, and loan

initiation fees. Closing costs include attorney’s fees, fees for preparing and filing

a mortgage, fees for title search, taxes, and insurance.

Advantages

■ If you qualify and your credit is good, you may be able to get a home equity

loan quickly.

■ With a line of credit, you only pay interest on what you borrow.

■ Since you pay for the loan from income, your home equity does not go down.

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Disadvantages

■ You may not qualify for these types of loans. Lenders look carefully at your

income, other debt, and credit history.

■ You must be able to make monthly payments on the home equity loan. If you

can’t make these payments, you could lose your house.

■ When your line of credit ends, you must pay off the entire loan. A lender may

not let you renew the loan.

Using a conventional home equity loan to solve cash-flow problems can be

risky. If your health declines, monthly loan payments along with other expenses

may become more than you can handle.

Long-term solution-Reverse mortgage

If you expect to live in your current home for several years, you could consider

a reverse mortgage. Reverse mortgages are designed for homeowners age 62 and

older. These types of loans are called “reverse” mortgages because the lender

pays the homeowner. To qualify for this loan, you must live in the home as your

main residence.

Unlike conventional mortgages, there are no income requirements for these

loans. You do not need to make any monthly payments for as long as you (or in

the case of multiple homeowners, the last remaining

borrower) continue to live in the home. When the last borrower moves out of

the home or dies, the loan becomes due.

There are two types of reverse mortgages available in the market.

These include:

■ Home Equity Conversion Mortgage (HECM)-This program is offered by the

Department of Housing and Urban Development (HUD) and is insured by the

Federal Housing Administration. These are the most popular reverse mortgages,

representing about 95% of the market.There are two types of HECM reverse

mortgages-the traditional HECM Standard loan, and the HECM Saver loan. With

a HECM Saver loan, borrowers pay lower upfront costs, but do not receive as

much money as they would with a HECM Standard loan.

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■

Proprietary reverse mortgages

-Some banks, credit unions, and other financial

companies may offer reverse mortgages designed for people with very high value

homes.

Depending on the type of loan, borrowers may be able to receive payments as a

lump sum, line of credit, fixed monthly payment for a specific period or for as

long as they live in their homes, or a combination of payment options. The money

you receive from a reverse mortgage is tax-free, and can be used for any purpose.

Reverse mortgages have unique features:

■ All homeowners must first meet with a government-approved reverse mortgage

counselor before their loan application can be processed (HECM program).

■ Older borrowers may receive more money, because lenders include life

expectancy in calculating loan payments.

■ The national limit on the amount you can borrow under the HECM program

may change from year to year. You can check the current national limit at

http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/

sfh/hecm/hecmabou

.

You now may use a HECM reverse mortgage to buy a home. This can make it

easier for you to downsize to a house that better suits your needs, or to move

closer to family caregivers.

Loan closing costs for a reverse mortgage are the same as what you would pay

for a traditional “forward” mortgage. These include an origination fee, appraisal,

and other closing costs (such as title search and insurance, surveys, inspections,

recording fees). HECM borrowers also pay a mortgage insurance premium.

Most of these upfront costs are regulated, and there are limits on the total fees

that can be charged for a reverse mortgage. The origination fee for a HECM loan

is capped at 2% of the value of the property up to the first $200,000 and 1% of

the value greater than $200,000. There is an overall cap on HECM origination

fees of $6,000 and a minimum fee of $2,500. You can finance these costs as part

of the mortgage.

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Advantages

■ You (or your heirs) will never owe more than the value of the home if you sell

the property to repay the loan, even if the value of your home declines. If your

heirs choose to keep the home, they will need to pay off the loan at 95% of the

fair market value of the home, as determined by a third-party appraiser.

■ You continue to own your house and can never be forced to leave, as long as

you maintain the home and pay your property taxes and insurance.

■ Depending on the type of loan, you may be able to get your loan funds through

a combination of payment options (such as lump sum and line of credit). You can

change the payment plan for a small fee.

■ For HECM loans, the available balance on the line of credit may increase over

time, depending upon interest rates.

■ If there is in an existing mortgage on the property, the proceeds of the reverse

mortgage are typically used to pay off the loan. This can increase the cash you

have available each month, because you no longer have to make payments on

your regular mortgage.

Disadvantages

■ Closing costs for a reverse mortgage (origination fee, mortgage insurance

premium, appraisal and other upfront costs), and the servicing fee can vary a lot

by the type of HECM loan, and by lender. Closing costs can be financed into the

loan.

■ You may use up a large part of your home equity over time and have less to

leave as an inheritance to your family.

■ If you are the only homeowner and you stay in an assisted living or nursing

facility for more than a year, you will be required to repay the balance of the loan.

■ Reverse mortgage borrowers must keep their home in good repair, and pay

property taxes and homeowners insurance. If you do not have enough money for

these expenses, you could face foreclosure and lose your house.

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