HOME EQUITY PLANS
HOME EQUITY PLANS (HEP) are designed to allow elderly homeowners to convert the equity value of their homes into cash without being forced to leave their homes.
A. The following HEP are currently available.
- REVERSE MORTGAGES allow a homeowner to borrow, via a mortgage contract, some percentage of the appraised value of their home. The homeowner may receive periodic payments and/or a line of credit to draw against. Some reverse mortgages involve the purchase of an annuity and are called Reverse Annuity Mortgages (RAM). In most reverse mortgages the loan to the homeowner is not repaid until the homeowner dies, sells the home or moves.
- SALE-LEASEBACK allows the homeowner to transfer title of the home to a buyer in exchange for an installment note satisfied by regular payments. The installment note may bear interest. The buyer then allows the former homeowner to remain in the home in exchange for rent. Because the rent is a lesser amount than the former homeowner receives from the installment note, they are provided with needed proceeds. Some sale-leaseback arrangements involve the purchase of an annuity
- TIME SALE allows the homeowner to sign a contract to sell their home at death but maintain title to and continue to live in the home. The buyer of the contract makes regular payments to the homeowner. The contract may provide for payment of interest and/or the purchase of an annuity.
- DEFERRED PAYMENT LOANS (DPL) are one-time lump sum loans used to repair or improve a home or to pay property taxes. They are usually offered by local government housing or community development departments with no repayment due until the homeowner dies, sells the home or moves.
B.VERIFICATION. Copy of specific HEP, such as a reverse mortgage, time sale, sale-leaseback or loan.
C. CONSIDERATION. Carefully review the plan to determine the type of compensation the homeowner is to
receive, frequency/schedule of receipt, amounts, etc.
- Payments made from a plan, such as, annuity, including reverse annuity mortgages or other reverse equity arrangement or regular installment payments, are considered as unearned income in the month received.
- The interest portion of any installment note or contract payment is considered as unearned income in the month received
- Proceeds other than interest, regular installment payments and annuity payments, i.e., lump sum payments and line of credit are not considered to meet the definition of income, but are considered as converted resources, according to
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