Reverse Mortgages

[Ahnuld]

There's nothing fascinating about the reverse mortgage business. If it's promoted on TV before bedtime...good grief.

RM's are fraught with extra fees and convoluted phrasing so that many elderly have been taken for hundreds of thousands of extra dollars. RM's normally represent bad planning but can provide relief for those that have not done adequate review of their finances previously or that may have limited assets in the first place. But here is a new twist on reverse mortgages that could help many. It is available for homeowners age 62 and older that can take out a reverse mortgage at the time they buy a home. It involves people who retire but don't have enough money to buy a new home in their selected retirement area.

Be a good agent and help your clients plan so that they do not have to annuitize and disinherit their home.

 

[Mr. Bill]

It's not always the agent/planner. So many times it's the individual. That, and living to 114. Ugh.

 

[Ahnuld]

It's not always the agent/planner. So many times it's the individual. That, and living to 114. Ugh.

True, true. Is 114 too short or too long?

 

[Charpress]

...can take out a reverse mortgage at the time they buy a home. It involves people who retire but don't have enough money to buy a new home in their selected retirement area.

That is an interesting concept. Many retired people cannot qualify for a mortgage because of fixed, and often limited, income.

I'm having a little problem picturing how this would work. Like everything else in this industry, I'm sure somebody has figured all the angles.

 

[Mr. Bill]

I would imagine the banks would be all over a 95/5 reverse mortgage on a home purchase.

I do have a piece of the Brooklyn Bridge I'm willing to sell, though.

 

[mmike160]

Prior to Insurance, I was in the mortgage business for 10 years and originated reverse mortgages (home equity conversion mortgage). From what I saw, they were an extremely helpful tool for senior homeowners in need of creating income. Most of the clients i had were struggling to make ends meet and just living on SS income and/or small pensions.

Most of these loans are FHA insured loans, meaning if the lender went out of business, FHA would continue the tenure payments or if there was ever a negative balance it would be insured. The borrower could never owe more than the value of the house.

For those of you who think these are big money makers; FHA reduces the max commission to 2% of the maximum claim amount (home value or FHA county limit). This is less than 50% of what can be made commission wise with a standard mortgage.

There are no income or credit guidelines with HECM's. Borrower's can get money in 3 ways, monthly payments (tenure), line of credits or lump sums.

I had a lady with a $250k house, pay off her existing $150k mortgage with a payment of $1,100 a month and be left with no payment and get a check for $300 for the rest of her life. She was so happy she cried at closing.

When she dies the lender DOES NOT take the house. Her heirs do have to repay the loan and the interest which has accumulated. Pretty much like a standard mortgage.