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Reverse Mortgage Products
Topdot Mortgage offers four reverse mortgage options. When you meet with a Topdot Reverse Mortgage Consultant, he/she will be able to answer all of your questions and help you determine which program best suits your needs.
A Home Equity Conversion Mortgage (HECM)
Home Keeper
Home Keeper for Purchase
The Flex Plan
A Home Equity Conversion Mortgage (HECM):
Is a reverse mortgage that is insured by the Federal Housing Administration (FHA). To be eligible for a HECM loan, you must be 62 years old or older and reside in the home as your primary residence. You must also own the house free and clear or use the proceeds of the loan to pay off any remaining balance.
Eligible Properties include:
• Single family detached homes
• Townhouses and condominiums meeting FHA guidelines
• Units in qualified planned unit developments
• Two to four unit single family homes with one unit occupied by the borrower
• Qualified properties held in a revocable trust and/or leasehold.
• Cooperative units are not an eligible property type
• Manufactured housing (must fixed foundation)
A HECM loan allows you to convert a portion of your home's equity into cash while you retain title and ownership of the property. However, a lien will be placed on your property, which will be security for the HECM loan. A homeowner must continue to live in the house and must continue to pay property taxes and insurance. There are no monthly payments and you do not have to repay the loan for as long as you live in your home.
The amount you can borrow depends on your age, the current 10-year CMT Index rate, the margin, loan fees, and the lower of the appraised value of your home or FHA's county mortgage limit.
With a HECM, borrowers have several options for receiving payments, without limitations on how the money is used. Options for receiving HECM payments include:
•Term: A regular monthly cash advance for a specific number of years that you select
•Tenure: A regular monthly cash advance for as long as you live in your home
•Credit Line: A specific dollar amount, withdrawn at unscheduled times in amounts of your choosing or in a lump sum payment until the credit line is exhausted
•Combination: A combination of these payment plans
Typically, most closing costs and fees can be financed with proceeds from the loan. Fees include the origination fee, third-party closing costs, a loan servicing fee, and interest on funds borrowed. Mandatory FHA mortgage insurance premiums are also assessed on all loans, in the event that the borrower outlives the loan. It assures that FHA will pay you what you are owed if your lender is unable to.
Home Keeper®:
Headquartered in Washington, DC, Fannie Mae is the nation's largest investor of home mortgages and a major investor of reverse mortgages, including the federally insured Home Equity Conversion Mortgage (HECM).
In 1996, Fannie Mae developed its own proprietary Home Keeper® reverse mortgage as a conventional market alternative to the HECM. The Home Keeper® was developed to address the needs that could not be served by the HECM program, such as individuals with higher property values, condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home.
The Home Keeper® is available in every state to homeowners 62 years of age and older. Eligible home types include:
• Owner-occupied single-family homes
• Condominium units meeting Fannie Mae’s guidelines
• Planned unit developments
• Qualified properties held in a revocable trust and/or leasehold
Cooperative units, however, are not an eligible property type for Home Keeper®. The amount of funds available to the borrower is determined by a formula and varies with:
• the age and number of borrowers at the time of application
• the lower of the appraised value or Fannie Mae lending limit of $417,000
• current interest rates
Home Keeper® loans can be larger than HECMs because Fannie Mae’s maximum lending limit – $417,000 for 2006 – is larger than the locally applied FHA maximum mortgage limit.
A consumer may choose to receive the funds from a Home Keeper® as:
• fixed monthly payments for life (i.e. for as long as the borrower occupies the home as his/her principal residence
• a line of credit
• a combination of monthly payments and line of credit. Home Keeper® borrowers are charged an origination fee that may not exceed 2 percent of the adjusted value of the home, a monthly servicing fee, and other closing costs. Many of these can be financed and included in the mortgage.
The interest rate charged on a Home Keeper® mortgage adjusts monthly and is equal to a fixed spread above an index rate – the current weekly average of the one-month secondary market CD rate, which is published by the Federal Reserve. The rate may never rise by more than 12 percentage points above the initial rate; there is no cap on a monthly adjustment other than a lifetime cap on the interest rate.
Home Keeper® for Purchase®:
The Home Keeper® for Home Purchase program enables seniors to obtain a Home Keeper® mortgage in connection with the purchase of a new home – in a single transaction.
Why use a Home Keeper® reverse mortgage for purchase?
The Home Keeper® for Home Purchase program enables seniors to obtain a Home Keeper® mortgage in connection with the purchase of a new home – in a single transaction.
Why use a Home Keeper® reverse mortgage for purchase?
A Home Keeper®:
• Reduces the out-of-pocket cash needed by the consumer
• Eliminates any new monthly mortgage payment
• Keeps more of the sales proceeds from the old house - or a larger amount of savings – to use for other purposes
To better explain this, take the following example. A 74-year-old man sells his home for a $75,000 profit and wants to buy a new home in sunny Albuquerque costing $115,000. To avoid a mortgage payment on the new house, he would need to pay $115,000 in cash. This means he would have to use the entire $75,000 from the sale of his first home, plus another $40,000 from his savings. If he doesn’t have the $40,000, he couldn’t buy the new house, unless he qualifies for a new home mortgage, which may be difficult and would require making monthly mortgage payments again.
Alternatively, the man could purchase the new home outright, or nearly so, using money from a Home Keeper® reverse mortgage, plus the sales proceeds from his old house.
This product might be used, for instance, by older homeowners who want to sell their old home and move closer to their children or to a warmer climate, or to move into a home that provides greater accessibility.
*Home Keeper® is a registered trademark of Fannie Mae.
The Flex Plan
Designed for owners of higher value homes, The Flex Plan product provides more loan proceeds to borrowers, exceeding HECM and Home Keeper® federal loan limits. The Flex Plan functions similarly to the FHA Home Equity Conversion Mortgage (HECM) and Fannie Mae Home Keeper® reverse mortgage programs, but is funded by a third-party investor.
Unique to the marketplace, in many cases The Flex Plan provides senior borrowers with more available cash than any other plan currently on the market. Additionally, it allows for reduced closing costs with fewer restrictions than similar products currently offered. The Flex Plan is the only jumbo product that does not require borrowers to draw a set percentage at closing, giving greater independence for borrowers to use the funds as they see fit.
For example, a HECM would provide a typical 74 year-old couple with an appraised home value of $700,000 with $206,008 in available funds. Using The Flex Plan, this same couple would not have to pay loan fees**, netting $298,200 in available funds, a difference of $92,192, a 44% increase.
The Flex Plan product is available through Topdot Mortgage branches and their extensive correspondent network.
Once you decide which loan is right for you, we’ll need to finalize the loan package. You won’t be approved for your loan until a complete loan package is submitted. To do this, we’ll request certain information from you, depending on what type of reverse mortgage you’re requesting. Click here to contact us.
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