Understanding a HECM Reverse Mortgage Statement

[@californiasmiles1]

Thank you! I’m a Realtor and being able to explain the statement to my potential client will get me the listing! That was awesome!!

[@thehecmguru1]

That's awesome Stephanie. thanks for the feedback.

[@mferro13]

Thank you so much for taking the time to do this. Very helpful!

[@thehecmguru1]

So glad it was helpful Manny. let me know if you ever have any questions I can help answer.

[@MrWaterbugdesign]

It's kind of unfortunate "mortgage" was used to describe this instrument. Adding "reverse" was cute, but the entire term "reverse mortgage" is confusing. We could say "opposite mortgage" or "not mortgage" and mean basically the same as "reverse mortgage". The first, and hardest, part of understanding "reverse mortgage" is to get "mortgage" out of your head. It is in no way a mortgage. It's much more a owner partnership. The lender is taking an ownership interest in the property in exchange for some amount of cash (lump sum ot LOC). Very similar to an LLC. The contract states how much ownership the lender gets and when they get access to their part of the property. For me it's a great deal. Keeping my house, which I rent out most of, it allows me to continue to earn rental income and a place to live (separate 1/1 apartment) AND pull out 40% of equity. Basically I have a passive investor in my property who never wants a cut of my rental income. Sweet deal. The other big difficulty in understanding is mortality. Most people are not good at facing our mortality. That's a key part of understanding a reverse mortgage. If you knew you wouldn't exist in 6 months (hit by a bus or whatever) a reverse mortgage would absolutely be a great deal to take. But when the time is unknown, or we don't want to face reality, the choice becomes a little more muddy. We tend to keep thinking like we have most of our adult lives...earn more, save more, prepare. It's hard to shift thinking.

[@thehecmguru1]

Hey Water Bug, thank you for your comment and I'm glad you're finding the Reverse is a good thing for you. I've helped around 1200 people do a HECM and almost without exception they all love it. the exceptions are people who either didn't like having access to their equity because they had needy kids, or people who didn't like the home they bought using the Reverse. It is a really great product. However, I do want to offer some clarification on a few things you mentioned to make sure people aren't confused. HECM's are mortgages. the mechanics of a HECM is exactly the same as any other mortgage. I.e. the homeowner borrows money from the bank and the bank files a lien against the home to insure repayment. The bank also charges interest against the balance of the loan until it is repaid. the only difference with a HECM is that payments are optional. So when interest is charged it is added to the balance of the mortgage and usually paid off when the homeowner sells the home or passes away and the kids sell the home. One important element of the new HECM is that the loan is designed to grow at or slower than the rate of appreciation. meaning that for most people the amount of interest being added to their loan is actually less every year than the amount of value they gain from home appreciation. this is fantastic because it means the vast majority of Reverse Mortgages will likely have roughly the same or more equity in the home when they pass away as what they had when they set the loan up. HECM's are the future of retirement. SS, Pensions, and 401k's alone are not going to be enough to help people retire. Reverse Mortgages are the key to financial freedom and flexibility after retiring.

[@stephenwright444]

Thanks that was helpful, wish you all the best.

[@stevemccormick6908]

So my grandma took out 50k and it has sat in her bank account for 1.5 years I see on her statement roughly a 600.00 interest charge is that due on top of the principal at the time of her death? I guess start asking is, is she accruing 600 a month to keep 50k liquid cash in her bank account? Should she put that money back?

[@thehecmguru1]

Hey Steve, if you want to send me her statement I would be able to give you a better answer but from what you're saying, no those numbers don't sound right. if her balance is only $50,000 then her interest charges should only be around $200-$250 a month depending on her interest rate. a $600 charge for interest every month would be more fitting of a current balance of around $120-$130k. Yes, if she's not using that $50,000 then she should put it back in the loan, IF she has a line of Credit. if she has a fixed rate Reverse then she should not put that money back in because she'll lose access to it. but if she has a line of credit then she can put that money back in, reduce her interest charges, and her available funds will grow much faster than if she keeps the money in her savings account. For example, if she puts the money in her savings account, she is likely getting a .01% return, in her HECM LOC, her interest rate right now is likely around 6% which means her growth rate on available funds is also 6%. So its a far better place to park money than in savings. plus it's non taxable when she does draw those funds down the road. Just make sure she never pays the balance of the loan down below $1,000 otherwise the lender will cancel the loan and she'll have to get a new one. I hope this helps, sorry it's a long response. you can call or email me if you have more questions. [e-mail] 435-359-9000

[@wideawake333]

So never are the taxes paid by the lender in a reverse mortgage correct? I have a client her mother passed and the house is currently in foreclosure and she assumed taxes were being paid each year.

[@thehecmguru1]

Hey Kimberly, that's a hard question to answer without knowing more, but let me try. Typically the homeowner/heirs are responsible to pay the property taxes on homes with Reverse Mortgages. But most counties won't foreclose until five years have passed without tax payment. so I'm surprised that the home would already be in foreclosure if the homeowner just recently passed away. In the old days banks used property tax payments as an excuse to foreclose right away on the home but the new reverse mortgage is designed to provide more leniency for the homeowner so typically if the property tax payments aren't being made a lot of bank servicers will make the payment for them and add that cost to the balance of the mortgage. but it sounds like this is an old Reverse Mortgage. So without knowing more about this situation I can't fully answer your question but if you want to call or email me I'd be happy to try to help you get to the bottom of what's happening. [e-mail] 435 359 9000

[@tinacollins2055]

Print on this statement is much too small to see.

[@thehecmguru1]

Thank you for that Feedback Tina, I have been meaning to re-record this video anyway as a few things have changed on most statements so I'll make sure the new version is easier to see. in the meantime, if you'd like help reading your statement please let me know. I'd be happy to jump on a call with you. my email is [e-mail]. my direct number is 435-465-2882