Special Information for Advisors: Attorneys, Tax and Financial Advisors, Fiduciaries
- A note to Trusted Advisors
- A reverse mortgage is not for everyone. My goal is to collaborate with trusted advisors to help determine if a reverse mortgage meets the needs of your client. I can accomplish this by providing detailed loan scenarios for you (with your client’s permission) and personal consultation to help reach a decision that is in the best interest of our mutual client. I believe in honest and ethical communication with all clients and their advisors regarding the advantages and disadvantages of a reverse mortgage. Please contact me at your earliest convenience.
- Advantages
- Reverse mortgages provide many advantages for the senior borrower. This loan has tremendous versatility as a retirement funding tool and I have another 25 ways to use the HECM. Please contact me for that list. Here is a short list of just a few:
- Proceeds received from a reverse mortgage do not affect Social Security or Medicare
- Frees up an illiquid asset (home equity)
- Can allow senior to purchase a new home with no mortgage payment
- Can provide source of income to cover monthly expenses while borrower allows their investments to recover and remain under management
- Maintain a line of credit (that grows) for health emergencies and surprises
- Pays off existing mortgage, in many cases freeing up thousands in monthly payments or preventing foreclosure. No more mortgage payments.
- Allows the senior to maintain their independence while living in their own home
- Provides money for in-home health care or medical expenses
- Disadvantages
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- Increasing loan balance, decreased equity over time
- May affect eligibility for needs-based programs such as Medicaid
- For those itemizing tax deductions, a reverse mortgage can eliminate the deduction for home interest if no interest is paid out of pocket. However if the homeowner pays the upfront fees and the accruing interest, the homeowner deduction may be available to them in the year the interest is paid
- The upront FHA mortgage insurance premium(UMIP) is often the most expensive item in closing costs.
- The Ideal Client
- While there is no stereotypical reverse mortgage client, there are common characteristics you can look for in a prospective reverse mortgage holder. This loan is no longer the loan of last resort. It is gaining the interest of seniors 62 and older in large part due to the Great Recession followed by the Great Pandemic. Some ideas below:
- Cash poor, house rich and has a relatively small or no mortgage.
- The desire to improve overall lifestyle and leaving a legacy of equity on the primary residence is not a priority.
- A borrower has the intention to access cash flow from a reverse mortgage which is not subject to withdrawal fees or personal income taxation.
- Understands that their home is a retirement asset in which they can live in long term and want to leverage their home to improve a that lifestyle.
- Open to financial planning retirement options using home equity.
- The desire to purchase a new primary residence and does not quaify for a traditional mortgage. Or this same client can save retirement funds undermanagement and use a reverse mortgage to purchase a primary residence.
- For higher valued home there are also proprietary / jumbo reverse mortgaes as a consideration with multiple program options.