There are Three Reverse Mortgage Options to Choose From:

1.     1 HECM Adjustable

The Adjustable Rate Mortgage (ARM) is tied to the LIBOR index and is updated monthly.  A “margin” is added to the LIBOR index and that creates the annual interest rate that is charged on the outstanding balance.  The ARM option offers clients the most flexibility.

• The senior can receive monthly income,
• The senior can take a disbursement at the time of closing,
• The senior can have the funds available in the form of a Line of Credit to use on an as needed basis, or
• The senior can have a combination of any of the above!

Additionally, should the client’s needs change in the future, the set-up of the loan can be changed at any time for a nominal fee (currently the charge is about $30 to make a change).

Finally, you should know that any unused portion of funds (the money that is available but hasn’t been taken yet) actually appreciates at 1.25% HIGHER than the rate that is being charged on the used portion.  Under certain circumstances, this can be used as an excellent estate planning tool and could leave a bigger estate to your heirs than just the value of the home.  Essentially, over time it is likely that the Line of Credit is worth more than the value of the home itself!

2.      HECM Fixed

The Fixed Rate program is not as flexible at the ARM, but it does offer a rate that will never change.  With the Fixed program, the only option for disbursement of funds is Lump Sum.  The Fixed Rate is often used when the purpose of the money is already known.  As an example: If the Principle Limit (or Loan Size) is $100,000  and the senior has a $85,000 mortgage lien that needs to be paid off, then after the original mortgage is paid, the senior would have $15,000 left over to save or spend however they like.

3.      HECM Hybrid

This is a relatively new option that combines the Fixed and the ARM.

Summary

Each program can then be modified further to your specific needs.  Your New Mexico Reverse Mortgage expert will show you how to qualify for a reverse mortgage, answer your questions and help you select a loan program that best suits your needs.

Why is Counseling Required by HUD?

7 Why is counseling required by HUD?

Counseling is required for all HECMs; in fact, Reverse Mortgages are the only mortgage products that require this. This is due to the fact that reverse mortgages are designed for an seniors who are often on fixed incomes and is driven by the equity in what is universally a person’s most valuable asset—their home. The Federal government and the reverse mortgage industry want to ensure you properly educated to make the right decision. A counseling session can take place either face-to-face or by telephone. Counselors have been trained to deliver the required information in as specific a manner as possible. The session generally lasts 60 to 90 minutes but can take longer as needed.

Loan originators are not permitted to direct you to a specific counselor or counseling agency. Instead, they are required by HUD to provide a list of counselors, including local agencies and national intermediaries approved by HUD to provide counseling across the country.

Generally, a counseling session will take place three to ten business days from the time you place the call to the counseling agency.

Reverse mortgage “counseling” an educational, tutoring process, providing clear explanations of the details of the process. The counselor will explain much of the same information that will be later provided to you by a lender.

Prior to being counseled, you will receive an information packet from either the counseling agency or New Mexico Reverse Mortgage, depending on who you contact first.  This information packet will include the following materials:

·       An informational document called "Preparing for Your Counseling Session"

·       A loan comparison print-out, so the counselor may review with you the best and most lucrative options.

·       A printout of the Total Annual Loan Cost (TALC) Disclosure required by the Federal Reserve Board on all reverse mortgage transactions. This form illustrates the cost of the loan if it is outstanding for different durations of time.

·       The National Council on Aging (NCOA) booklet, Use Your Home to Stay at Home – A Guide for Homeowners Who Need Help Now.

No fees may be incurred by you or on your behalf prior to completion of mandatory counseling.

A Counselor will:

·       Explain a reverse mortgage to you, as well as the details of the loan process you can expect

·       Explain the various reverse mortgage product options;

·       Explain the costs associated with the loan;

·       Utilize a Financial Interview Tool (FIT) to help you determine if you can afford a reverse mortgage and meet your financial obligations, such as paying your taxes and insurance;

·       Explain alternative options that might be available to you, such as property tax deferral programs;

·       Check your eligibility for grant money or other financial assistance by utilizing Benefits Checkup, a tool for identifying services, such as housing assistance, tax deferral programs, home repair grants or loans, food stamps, fuel assistance, social services or healthcare;

·       Explain the consequences affecting the prospective borrower’s eligibility under state or federal programs and the impact on the estate or your heirs;

·       Review the loan comparisons provided to you by the lender as well as the Total Annual Loan Cost disclosure;

·       A counselor will not recommend that you obtain a specific product from any particular lender. His or her role is to provide information and clarity but not to advise; your choice of lender is purely your own.

·       Counseling generally costs in the vicinity of $125-250 per session. Some counseling agencies are awarded various grants that sometimes enable them to offer the service free of charge.

·       When you complete the session, both the counselor and you will sign a counseling certificate verifying you have fulfilled this requirement.