RFI: -


RFI - Using a HECM Reverse Mortgage to Augment Financial Assets

(and Monthly Payments)


The HECM reverse mortgage is a powerful and flexible tool that allows seniors to tap into the equity in their home.  Unfortunately, HECMs have primarily been viewed (and used) as an "option of last resort" by retirees in desperate financial straits. One of the most powerful features of RFI is that it provides the tools that allow retirees and their advisors to integrate the HECM into a comprehensive retirement plan. For a high level discussion of the use of HECMs in retirement planning, see HECM Reverse Mortgages Can Reduce Retirement Income Instability.

A key component of RFI is its ability to access The Mortgage Professor's network of HECM reverse mortgage lenders. This allows RFI to use real-time HECM pricing in its calculations. Whenever you calculate a scenario that involves a HECM, RFI automatically accesses the network to get up-to-the-minute pricing from all reverse mortage lenders on the network.

By default, RFI selects the "best" HECM lender for each scenario defined in RFI. You always have the ability to view the pricing of every HECM lender in the network and select the lender you prefer - this process is described in HECM Reverse Mortgage Lender Network.

HECM reverse mortgages offer four options for retirees who want to monetize the equity in their homes:

The last "up-front cash" option is the one typically used as a "last resort" and is not suitable for retirement planning purposes; it is not included in the options available in RFI.  We will look at how to use each of the other three options in the sections below.

Note that in each of the four user guide sections above, we'll assume that basic information about the retiree and their home has been entered at the top of RFI in rows 4-12 as follows:

In these examples we will assume a home value of $500,000 with no outstanding mortgage balance.  If the retiree has an existing mortgage, fill in the appropriate values in "Existing Mortgage Balance", "Existing Mortgage Payment", and "Existing Mortgage Interest Rate".

If the existing mortgage is an Adjustable Rate Mortgage (ARM) enter the current monthly payment and interest rate. If there is more than one mortgage on the home, enter the total mortgage balance and payment and the interest rate on the first mortgage.

RFI uses existing mortgage information for two purposes:

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