CMPS Homeowner Cash Flow Scenarios 5

Question 1

A retired homeowner on a fixed $4,000/month Social Security income has a $1,400 mortgage payment. A reverse mortgage would eliminate the payment. What is the primary cash flow benefit?

Accepted Answer

It frees $1,400/month in disposable income without requiring repayment while they live in the home

Answer

A reverse mortgage eliminates the monthly payment requirement, freeing up $1,400/month in cash flow without repayment obligations as long as the homeowner occupies the property.

Question 2

A homeowner is comparing a 20% down payment versus a 10% down payment with PMI of $150/month. The 20% down saves $150/month but requires $25,000 more upfront. What concept helps evaluate this decision?

Accepted Answer

Opportunity cost of the additional down payment capital

Answer

The opportunity cost of deploying an extra $25,000 (what it could earn elsewhere) must be weighed against the $150/month PMI savings.

Question 3

A homeowner receives a job relocation offer requiring a move in 18 months. They currently have a $280,000 mortgage at 3.75% and rates are now 6.5%. Which cash flow strategy is most appropriate?

Accepted Answer

Retain the existing low-rate mortgage and plan to sell within the timeline

Answer

With only 18 months remaining, refinancing would result in net losses after closing costs before the property is sold; retaining the low-rate loan is optimal.

Question 4

A homeowner has $200,000 in home equity. An investment advisor suggests a cash-out refinance to invest in the stock market. What is the primary cash flow risk a CMPS specialist should identify?

Accepted Answer

Investment returns are not guaranteed while the higher mortgage payment is a fixed obligation

Answer

Leveraging home equity for market investments creates guaranteed increased monthly debt obligations against variable, non-guaranteed investment returns — a significant cash flow risk.

Question 5

A homeowner's property value drops 15%, putting them slightly underwater. They have a stable job and their mortgage payment is affordable. What is the most sound cash flow-based recommendation?

Accepted Answer

Continue making payments; negative equity alone doesn't create a cash flow problem if payments are manageable

Answer

Negative equity is a balance sheet issue, not a cash flow problem; if monthly payments remain affordable and income is stable, continuing payments is the sound strategy.

(CMPS) Certified Mortgage Planning Specialist Practice Test

(CMPS) Certified Mortgage Planning Specialist Practice Test

CMPS Homeowner Cash Flow Scenarios 5