Issue 46.16
I love the commercials you see on Television with a Reverse Mortgage. The actors show elderly couples and then just state the obvious that the Reverse Mortgage is government Insured and you control the title of the home as do your heirs. They really never explain why this is an option for seniors or why our senior client’s are looking at this option more today than ever before?
So, let’s talk about the top three reasons we see our client’s opting for the Reverse Mortgage and try and keep things as simple as possible.
- Buying a home. Clients that are moving into our area are purchasing a home with a version of the reverse mortgage called the HECM for Purchase. This is where a couple that are over 62 can purchase a home for roughly half the price and have no mortgage payments for life. So, today we have a couple selling a home in Salt Lake for example for 250,000 and they can move to St. George and using the Reverse Mortgage purchase option they can buy a home for say 300,000 and only put half down or 150,000 and in this example and have no mortgage payments for either of their lives. They can keep the rest of the balance from their sell of the home in Salt Lake in savings and they have moved from Salt Lake to St. George in a nicer home and still have 100,000 in their savings for their retirement in this typical example.
This just simply allows a client to purchase a nicer home for the next 20 years plus or as long as they both live and still be debt free from a mortgage payment and yet have savings in their bank from their previous home on top of what they had to put down on the new home.
- The second most popular option we see is to simply stay in their existing home and eliminate a mortgage payment that they are making under a fixed income that might be zapping their savings during retirement. If you are over 62 and still making a mortgage payment for the next 30 years, you have to ask yourself why? You are adding more equity in your home for your kids or heirs, but you are also draining you and your spouse’s income and savings to do so. So, making mortgage payments on a conventional loan really becomes more difficult to do when they lose a spouse. One dies and we lose the lower of a social security and maybe part of a pension and then the remaining spouse is tied to a mortgage payment with reduced income and it makes for a tough go.
- Finally, the third option is to simply add a security blanket or savings and or credit line that they can pull from if they need the funds in the future. If a medical need pops up or they need to help kids or grandkids in some fashion, they can use their line to help them in various ways and not take on any payments or liability. Again, when one of the spouses pass, and the remaining spouse has limited income then the savings or credit line is there to act as a safety cushion or retirement income to supplement their existing funds during their lives. For heaven sake if you don’t use your funds, then your heirs will still get your home when you pass and only owe back what you have used out of the funds. There still is normally substantial equity remaining for heirs when their parent’s pass.
Remember, as well that heirs or children can never be responsible for any debt on the home or this option would never make sense.
The bottom line is that if seniors really understood the loan options and truly the options, you would have even a greater percentage opening a line even simply if it is only for emergency or security in the case that they need the funds. There is a reason that nearly 60% of our senior client’s that we work with on a new home or have a mortgage will elect to go the Reverse route today.
For more information and or a free reverse mortgage kit, please visit or call the office at 525-2222 for more information today.
Until next time. Brandon Hansen