REVERSE YOUR THINKING®
  • Apply Now
  • HECM TOOLS
    • HECM Right for You
    • Quote
    • Calculator
  • Options
    • HECM Vs. HELOC
    • HECM for Purchase
    • Proprietary Loan - Jumbo Reverse
    • LESS - Limited Equity Share System
  • Expand Your Thinking
    • Videos
    • Historical Info
    • What's A Reverse Mortgage
    • HECM Funds
    • In The News
    • Aliens
    • Elder Abuse
    • Glossary
    • Resource
      • Concierge
      • Professional Concierge
  • BLOG
  • About Us
    • Mathius Marc Gertz Reverse Mortgage Specialist
    • Testimonials
    • Events
  • Apply Now
  • HECM TOOLS
    • HECM Right for You
    • Quote
    • Calculator
  • Options
    • HECM Vs. HELOC
    • HECM for Purchase
    • Proprietary Loan - Jumbo Reverse
    • LESS - Limited Equity Share System
  • Expand Your Thinking
    • Videos
    • Historical Info
    • What's A Reverse Mortgage
    • HECM Funds
    • In The News
    • Aliens
    • Elder Abuse
    • Glossary
    • Resource
      • Concierge
      • Professional Concierge
  • BLOG
  • About Us
    • Mathius Marc Gertz Reverse Mortgage Specialist
    • Testimonials
    • Events
Search

Staying Financially Healthy

Uses of a HECM by Retirees Dependent on Pensions

1/9/2020

0 Comments

 
Retired seniors with equity in their home, who depend on pensions rather than a bucket of financial assets, can supplement their pension income using a HECM reverse mortgage in two different ways. One way is to choose the “tenure” option under the HECM program, and receive a fixed annuity payment for as long as they remain in the house. The second way is to choose the line of credit option, using some or all of it to purchase an immediate annuity from a life insurance company.

Advantages and Disadvantages 
While the HECM tenure annuity pays a little less than the life annuity at most given ages, the borrower retains ownership of the reserve account underlying the annuity. This allows him to change his mind from time to time and switch to a credit line for the reserve amount still available. And if he dies early, the tenure continues to his spouse or the remaining equity in his home goes to the estate. On a life company annuity, in contrast, early death terminates all payments unless the policy has a guaranteed payout, which would reduce the monthly annuity amount he received and make it nearly identical to the HECM tenure payment option.

On the other side of the ledger, if the borrower gets sick and has to go to a nursing home, the HECM annuity will terminate after a year of non-occupancy.  That’s why it is called a “tenure payment” rather than a “life annuity”. However, the homeowner can take all remaining monies out before that year is up and then sell the house to acquire the remaining equity. With a life company annuity, in contrast, the senior could be in a nursing home indefinitely without shutting off the annuity.

Regulations that Govern
Life Annuity Purchases 
With HECM Funds
At an early stage, after 1998, in the evolution of the HECM, some seniors were induced to take out mortgages for the express purpose of purchasing life annuities. The duel licensed loan officer/insurance agent involved earned two commissions, and the needs of the senior were often disregarded. As a result, a law was passed that in effect prevents a lender from disbursing funds at the closing that will be used to purchase an annuity.

         California Civil Code Section 1923.2(i) states that:
        “A lender or any other person that participates in the origination
        of the mortgage shall not require an applicant for a reverse
        mortgage to purchase an annuity as a condition of obtaining
        a reverse mortgage loan.”
​

But the law doesn’t get in the way of seniors whose retirement plan includes the purchase of a life annuity from an insurance company. They need only to take a HECM credit line at closing, then draw on the line later to pay for the annuity.  This keeps the HECM transaction and the annuity transaction separate, as they should be, and allows the senior to shop for them separately.
- Thanks to The Mortgage Professor for information used here.
0 Comments

Your comment will be posted after it is approved.


Leave a Reply.

    Mathius Marc Gertz
    Mathius Marc Gertz MBA, AFC®, CAPS
    Marc has 36 years in financial services and 6 years in teaching.
    View my profile on LinkedIn
    Visit Us on Google

    Archives

    November 2020
    October 2020
    September 2020
    August 2020
    July 2020
    June 2020
    May 2020
    April 2020
    March 2020
    February 2020
    January 2020
    December 2019
    November 2019
    October 2019
    September 2019
    August 2019
    July 2019
    June 2019
    May 2019
    April 2019
    March 2019
    February 2019
    January 2019
    September 2018
    August 2018
    July 2018
    June 2018
    May 2018

    RSS Feed

Welcome Home | Custom Rates | Self-Evaluation | What is a Reverse Mortgage? | Terms Of Use | Privacy Policy | Glossary
Mathius Marc Gertz MBA, AFC®, CAPS | ​BRE #001999021 | NMLS #1125159 | DBA Reverse Your Thinking® Mortgage
310-447-5266 | marc@reverseyourthinking.mortgage |1620 Broadway, PO Box 3707, Santa Monica, CA 90408
Reverse Your Thinking ® | Copyright 2018-2020 | SAYWHYNOT, INC. | Website by Rhonda May
NRMLA-Mathius-Marc-Gertz
BHBA-Mathius-Marc-Gertz
SMCC-Mathius-Marc-Gertz
Equal-Housing-Lender-Mathius-Marc-Gertz
SMBA-Mathius-Marc-Gertz
LAGLCC-Mathius-Marc-Gertz
FPA-Mathius-Marc-Gertz
NAIPC-Mathius-Marc-Gertz
CalCPA-Mathius-Marc-Gertz
ALCA-Mathius-Marc-Gertz
  • Apply Now
  • HECM TOOLS
    • HECM Right for You
    • Quote
    • Calculator
  • Options
    • HECM Vs. HELOC
    • HECM for Purchase
    • Proprietary Loan - Jumbo Reverse
    • LESS - Limited Equity Share System
  • Expand Your Thinking
    • Videos
    • Historical Info
    • What's A Reverse Mortgage
    • HECM Funds
    • In The News
    • Aliens
    • Elder Abuse
    • Glossary
    • Resource
      • Concierge
      • Professional Concierge
  • BLOG
  • About Us
    • Mathius Marc Gertz Reverse Mortgage Specialist
    • Testimonials
    • Events