Unlock Home Equity to achieve your retirement goals…
The Retirement Reality
Today, older Americans face a great deal of uncertainty as they move through their retirement. With rising healthcare costs, a volatile stock market and ongoing mortgage and credit debt, it’s not surprising that 87% of Baby Boomers are not very confident that they will retire in a comfortable lifestyle.1 Many are afraid that their savings accounts, investment portfolios and government benefits will not provide enough money to sustain their changing needs and financial obligations as they age.
Rethinking Retirement Planning
If you are like most people, retirement planning generally relies on assets such as: 401(k)s, IRAs, traditional pensions, Social Security benefits, as well as regular taxable savings and investment accounts. But as a homeowner, you have another, often overlooked, retirement planning asset: Home Equity.
U.S. homeowners age 62+ have more than $7 trillion in home equity,6 making it the largest asset for most households entering retirement.7 For the average retiring couple, home equity makes up 70% of their net worth—with other assets like IRAs, savings and personal property only making up 30%.8
With such a large proportion of personal wealth tied up in one’s home, it’s time to rethink how home equity can be used as another tool in your financial arsenal.
New Ways to Access Home Equity
Over the last 30 years, reverse mortgages have gained acceptance as part of strategic retirement planning. In fact, a growing number of respected retirement researchers, such as Harold Evensky, Dr. John Salter, Dr. Wade Pfau, and the Center for Retirement Research at Boston College have all conducted numerous studies to evaluate the pros and cons of reverse mortgages for the benefit of consumers. They have concluded that the reverse mortgage is an important option, with multiple uses that can often help consumers be better financially prepared in retirement, and avoid outliving their money.
We recognize that each of our customers is unique. That’s why we offer a full range of powerful, customized options to help you access your home equity and gain a new source of income-tax-free funds.* We offer traditional Home Equity Conversion Mortgages (HECMs), as well as a “private label” reverse mortgage called Equity Elite®, which may provide certain advantages over a HECM.
To help you better understand your options, here is a quick overview of some of the key features of each product. We can help you determine if a reverse mortgage is right for you, and if so, which options best fit your needs and plans.
How is EquityElite® Different?
It’s specifically designed for:
» Those seeking lower up-front costs—EquityElite® has no up-front or ongoing mortgage insurance premium, which can mean lower closing costs than a traditional reverse mortgage**
» Refinancing or buying a higher-value home—because it provides access to more loan proceeds than a HECM can
» Condominium owners and buyers—because more condos qualify than with a HECM
» Borrowers as young as 60†—younger than with a HECM
Using Equity Elite®
Proceeds from an EquityElite® Reverse Mortgage can be used in a variety of ways to help you improve your cash flow and gain more financial control. Here are some examples:
- Refinance existing mortgage debt, to dramatically reduce your monthly payments
- Consolidate debts such as high-interest credit cards, auto loans, etc. to lower your monthly bills
- Buy a new home that better fits your needs
- Pay for medical expenses & long-term care
As with any mortgage, you will have to meet your loan obligations: Keeping current with property taxes, insurance, and maintenance.
Repaying the Loan
Usually homeowners (or their heirs) choose to repay the loan balance—which includes any fees that have been added and accrued interest—through the sale of the home. You can also choose to repay the loan with other assets, or by refinancing through a traditional mortgage.
As with any mortgage—forward or reverse—you must meet your borrower obligations throughout the life of the loan, including keeping current with property taxes, insurance, and maintenance of the property.
In addition, the property must be your primary residence throughout duration of the loan. If any of these obligations are not met, the loan will become due and payable.
EquityElite® for Home Purchase
Many people don’t realize that you can also buy a house or condo with a reverse mortgage by combining a one-time investment of your own funds (down payment) with Equity Elite® loan proceeds to complete the transaction. The cash required typically ranges from only 55% to 75% of the purchase price, depending on your age.* For older borrowers, the contribution amount could be as low as 42%. Unlike a HECM, seller concessions of up to 6% are allowed for closing costs on the new property.
Example: Meet Anne and Peter, age 70.
Anne and Peter’s largest asset is their $5 million home. However, they still owe $500,000 on their existing mortgage, plus another $60,000 in credit card and auto loan debt. In addition, Peter recently suffered an illness and now needs to use a wheelchair.
To stay in their home, they need to make $70,000 worth of modifications such as installing a ramp, a stairlift, and new bathrooms. They don’t want to drain their savings and are worried they won’t qualify for a traditional mortgage.
Their daughter, Vanessa, encourages them to meet with their financial advisor to learn more about their options. Their financial advisor presents them with the following:
With a standard 15-year jumbo mortgage,1 Anne and Peter would be able to refinance their first mortgage and take out $130,000 to consolidate other debt at a lower rate, as well as make the necessary additions to the house. However, they would be required to make a monthly principal and interest payment of $5,387 and they are unlikely to qualify for the loan because neither one of them is working.
Using an Equity Elite® fixed-rate, lump-sum loan,2 Anne and Peter can refinance the $500,000 mortgage on their home and consolidate the $60,000 debt into the same loan, at a lower interest rate than their previous mortgage. They can also receive $1,716,773 in loan proceeds at closing, which they can use to pay for the home modifications and then have additional funds for any other situation that may arise.
Plus,it is generally easier to qualify for an EquityElite® loan, which has more lenient income qualifications than a traditional mortgage because it’s designed with the needs of retirees in mind. Most importantly, they do not have monthly principal and interest payments—which greatly improves their cash flow.*
Their financial advisor arranges for them to meet with a reverse mortgage specialist. They decide to take out an EquityElite® reverse mortgage, because they like having the flexibility to no longer make monthly mortgage payments,* as well as the flexibility and peace of mind of having additional funds available if they need them.
*As with any mortgage, they must meet their loan obligations, keeping current with property taxes, insurance, and maintenance.