Your Thoughts on This Cool Reverse Mortgage Strategy for Boomers

[Norwayguy]

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

I would think the OPs friend would be fighting the vast majority of people looking to downsize. I can understand the supposed selling point of getting into a better neighborhood, but wouldn't it be just as easy to find another as good neighborhood with a smaller home?

But to each thier own, this could be a creative strategy for that 1 client but I guess I wouldn't be marketing it that way.

 

[Focus LTC]

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

Hmmm...my question is has your friend found anyone who would want to do this? I imagine that seniors who have no one to leave anything behind, having to move and go though selling a house, getting a new one and then reverse mortgaging it would seem like too much for them would be hard to find.

My Friend is a 72 year old mortgage broker. He did it for himself and his brother in law. They've had plots of land by the water that they've owned since the 80's. They built their dream homes on the Chesapeake.

This is the order in how they did it:
1) Qualified for the new construction loan
2) Moved in to the newly built home
3) Sold the old house
4) Paid off half of the new home loan
5) RM'd the remaining half of the new home loan

The process is very very cumbersome. My eyes lit up when he told me what he was doing. He doubled up. Total out of pocket was about 2 month's mortgage payments. Now he has a brand new luxury home on the Chesapeake and he keeps the commissions...

Its neat but would be hard to mass market I told him...

 

[Norwayguy]

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

My Friend is a 72 year old mortgage broker. He did it for himself and his brother in law. They've had plots of land by the water that they've owned since the 80's. They built their dream homes on the Chesapeake.

This is the order in how they did it:
1) Qualified for the new construction loan
2) Moved in to the newly built home
3) Sold the old house
4) Paid off half of the new home loan
5) RM'd the remaining half of the new home loan

The process is very very cumbersome. My eyes lit up when he told me what he was doing. He doubled up. Total out of pocket was about 2 month's mortgage payments. Now he has a brand new luxury home on the Chesapeake and he keeps the commissions...

Its neat but would be hard to mass market I told him...

All very true and he has no mortgage payment all for the price of 2 mortgage payments......and the fact that his 50% equity is eroding every month. I don't sell Reverse mortgages though I do let all my clients know they exist and will refer them out if I think its the right time...Maybe my clients are unquie but most of them will drain all other assets before Reverse Mortgageing the house...And since as they age they are allowed to take a higher percent in a reverse mortgage waiting only seems to make sense.

 

[LGilmore]

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

"Now he has a brand new luxury home on the Chesapeake and he keeps the commissions..."

there you go..he keeps the commissions. So, why would this tactic be a good idea for joe and josey average american? They don't get to keep the commission, in fact this method really leads them to paying out a lot more in commissions.

It only does make some sense if you get to capture commissions. So not really a practical idea for the general market.

 

[The Rabbi]

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

I see some positve comments which is good. RMs are not for everyone, as was pointed out and yes they need to be broke to do a RM. My friends, he's 69 retired with pension went into the hurricane window an shutter business here in So Fl. They have lost all their money and live in a $350k home with a small mortgage. They want a smaller house in the country which they could buy with the proceeds from the RM. They sell the house for what's owed or a little more which is a great buy. Of course, they could just put their house on the market and stay stressed. With this plan, they will retire debt free and a paid for home.

 

[rainmand]

I'm originating a purchase Reverse Mortgage in Costa Mesa, CA, right now. My client is 63 and she's purchasing a 575k property for 242k down, and won't have a monthly mortgage payment obligation. If she were older, her down payment would be smaller (the older you are, the more benefit you receive from a Reverse Mortgage).

She's up-sizing. She had a 1 bedroom 1bathroom condo in Laguna Woods, a retirement community, but was too young for that community. She sold it, and is up-sizing to a 3 bedroom 2 bathroom Single Family Residence, in regular neighborhood, and loves being able to use the Reverse Mortgage for this purpose.

She could have kept her condo and rented it, and still use a Reverse Mortgage to buy the house, but she'd have to show the Lender she can afford to pay the property taxes, homeowners insurance, and day to day care/maintenance of both properties. It was much easier for to sell the condo first, because then she can buy the house and not have to qualify with income, employment, assets or credit.

She has no heirs, so is not concerned about loss of equity. If she had heirs, and was concerned about leaving a legacy, I'd explain the benefit of getting a Universal Life policy. If she were married, I'd recommend a last to die policy.