For example: Meet Heather, age 70.
Recently widowed, Heather’s largest asset is her $3 million home. However, she still owes $50,000 on her existing mortgage, plus another $60,000 in credit card and auto loan debt.
Heather wants to remain in her home, but is worried that she will be unable to pay down her debts while saving enough money to fund any long-term healthcare that she may need in the future. She has already begun to withdraw funds from her retirement portfolio each month to make ends meet, and her financial concerns are steadily growing. Her daughter Vanessa encourages her to learn more about reverse mortgages and try to consolidate her debt.
Which reverse mortgage would you recommend to Heather?
Equity Elite ® Home Value: $3 million Principal Limit: $1,152,000 † Closing Costs: $4,004 ‡
HECM Home Value: $3 million Principal Limit: $337,834 * Closing Costs: $24,235 ‡
The Facts: Both a HECM and Equity Elite ® will allow Heather to consolidate her debt and gain additional income-tax-free funds || . However, the current loan limit of the HECM program—$765,600—only permits her to draw funds on a fraction of what her home is worth. Equity Elite ® gives Heather the opportunity to borrow funds based off of her home’s full appraisal value, resulting in almost 3.5x more in principal funds. Plus, the closing costs on the Equity Elite ® loan are $20k less than the HECM fees —meaning she won’t have to tap into her IRA to cover the costs, which would trigger yet another taxable event. || *Estimates shown are based on a California property and the HECM Fixed 5.060% as of 6/25/2019. Recent interest rates offered by Reverse Mortgage Funding range from 4.392% to 6.017% Annual Percentage Rate for Variable rate loans. Closing costs may include an origination fee, third-party closing costs ranging from $1.00 to $41,305.76 depending on purchase price, and an FHA Mortgage Insurance Premium ranging from $0.00 to $15,903.75 depending on purchase price. Please contact Reverse Mortgage Funding LLC (RMF) for details about credit costs and terms. † Estimates shown are based on a California property and the Equity Elite ® Fixed 6.300% as of 6/25/2019. Recent interest rates offered by Reverse Mortgage Funding range from 5.747% to 7.974% Annual Percentage Rate for Fixed rate loans. Closing costs may include an origination fee, third-party closing costs ranging from $2,131.98 to $35,014.17 depending on purchase price. Please contact Reverse Mortgage Funding LLC (RMF) for details about credit costs and terms. ‡ These amounts do not include any fees or costs that the borrower has paid before closing. || Not tax advice. Consult a tax professional.
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