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Reverse Mortgages present another opportunity for mortgage lenders to make loans and for home builders and Realtors to make additional sales. But, are they a good deal for seniors?
Some believe they are a rip off of seniors who may need some short-term cash and have equity in their home. The problem, they say, is the ultimate interest cost and the upfront fees, with a limit on access to the total equity.
Once a consumer takes out the reverse mortgage they can no longer tap more equity in their home. Any remaining, or increased, equity will be used toward repayment of the loan once the homeowner sells the home or dies.
For some, it’s not a bad deal if they wish to stay in their home and they have built up a large amount of equity. They can take some cash with no payments due on the loan.
Their only recurring expense is for property upkeep, taxes, and insurance. The money taken can help with these expenses as well.
The program can also be used to purchase a newly constructed home. This is good news as many times seniors are looking to downsize to the many age-restricted communities being built. The senior can sell their existing home, maxing out their equity position, using some of the money as the required down payment for the new home.
They can invest, or put aside, the remaining funds for their retirement and to cover the expenses associated with owning the new home. As the home is new, regular maintenance costs should be minimal.
The taxes and insurance costs may also be less when the new home is smaller than the one they own. The senior gets the maximum benefit from their equity, without the burden of a mortgage payment.
So, is a Reverse Mortgage good or bad for seniors? I believe it all depends on the circumstances.
It allows some to live out their lives in the home they worked so hard to own. They are also getting some benefit from their equity, without the burden of a mortgage payment. Others can sell, take their equity, and downsize to a brand new home and reduce monthly expenses.
Of course, there’s a cost. Some think it’s too high. Maybe. But, Reverse Loans offer seniors options to remain independent and reduce their monthly expenses. This is huge for seniors. I know…
As a lender, these loans offer more opportunities for business. This is a good way to generate more loans in the new purchase, higher rate market and provides your LOs with more options to offer to their Realtor and builder partners.
Reverse Mortgages may not be for everyone, but they are definitely a viable home financing option for some. If you, as a lender, wish to participate, you need this option in your lending arsenal with the people trained to originate, process, and close them.
The decision is yours. If you choose to do so, make sure you know all the rules. This is one loan you don’t want to own.
