Your Thoughts on This Cool Reverse Mortgage Strategy for Boomers

[Focus LTC]

I have a friend in the RM business and has he been using this as a way to get bigger ticket sales and to get someone the house of their dreams with no mortgage. He calls it "doubling up."

Here is the scenario:

Step 1) Prospect is over 62, lives in a house that is PAID for and lets say its worth $200,000.

Step 2) Prospect sells his $200,000 home, buys a new home for $400,000. Puts down the $200,000 from the sale of his first home and RM's the balance of $200,000.

And Done!

This person got a bigger home in a better location in a safer neighborhood for NOTHING!

RM's aren't just for cash strapped poor seniors. This strategy will appeal to status seeking boomers (and there are plenty of them).

Think about it this way, if you are healthy at age 62, there is a pretty good chance that you could live an additional 20-25 years. Why not spend the next 20-25yrs in the house of your dreams.

Check this scenario. You have a nice $500,000 home but you've always dreamed of the $1Million beach front mansion in sunny south Florida. A couple strokes of the pen and boom! Its yours!

What are some of your thoughts on this as a marketing strategy for RM's?

 

[Crabcake Johnny]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

I believe they have to first go through counseling. Would "we simply want to buy a bigger home" make it through?

 

[GoCubsGo]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

Kids finally move out and they would want a bigger house with bigger utilities and twice the space to keep clean? Don't most seniors either want to downsize or stay put because they don't want the hassle of moving?

 

[SportsNut]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

I have a friend in the RM business

Stories that start out like this, don't usually end well...

Step 2) Prospect sells his $200,000 home, buys a new home for $400,000. Puts down the $200,000 from the sale of his first home and RM's the balance of $200,000.

This isn't exactly how it works... check out this little excerpt from the Nat'l Mtg Lenders LA:

"You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing indebtedness must be paid off.

 

[GoCubsGo]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

Stories that start out like this, don't usually end well...




This isn't exactly how it works... check out this little excerpt from the Nat'l Mtg Lenders LA:

"You may qualify for a reverse mortgage even if you still owe money on an existing mortgage. However, the reverse mortgage must be in a first lien position, so any existing indebtedness must be paid off.

What he is talking about would only have the one 200k mortgage. They put 200k down.

 

[Crabcake Johnny]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

I think we're missing the biggest hole. A senior(s) can't sit down with a counselor and say "so we're thinking about buying a bigger home..."

They need to sell their first (upon the agent's recommendation) and buy the $400,000 house, as in this scenario.

It's only after they buy the $400,000 that they can meet with a counselor and start the process. And if it doesn't go through as planned? Someone has a big lawsuit on their hands.

It simply doesn't pass the sniff test.

 

[billyg]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

I believe they have to first go through counseling. Would "we simply want to buy a bigger home" make it through?

Counseling is not a "qualification". They do not have to "pass underwriting" when going to counseling. And yes, they can say, "we want a bigger house", though it would more likely be "we want this nice ranch in a nicer, more expensive neighborhood".

I know of two people that have purchase homes in a similar manner, in both cases it was simply a more expensive neighborhood.

 

[Crabcake Johnny]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

Counseling is mandatory and where this all unwinds. The conversation likely ends with the seniors saying "this insurance agent is telling us that we can..."

 

[ksigmtsu]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

In this example scenario, it looks like they lost 200,000 to give their house to a bank for a loaner.

What prudent person can be misled into this terrible financial decision?

 

[Crabcake Johnny]

Re: Your Thoughts on This Cool Reverse Mortgage Strategy for Boom

I think you missed the goal of his friend which was outlined with this statement:

"I have a friend in the RM business and has he been using this as a way to get bigger ticket sales"