Reverse mortgages convert a home’s equity into tax-free income for a senior homeowner. There are many advantages to acquiring a reverse mortgage. Some of these, as compared to traditional loans you might consider when speaking to your customers about the possibilities of a reverse mortgage and the long-term effect on their lives, include:
The client owns the home and keeps the title as long as they retain ownership, just as they did with a traditional mortgage, until they move out, pass it on to their estate, or a loan maturity event occurs.
The client doesn’t need to own the home free and clear, but do need a certain amount of equity to borrow against. Any existing mortgages must be paid off with the reverse mortgage. However, this removes the monthly mortgage payments.
A reverse mortgage is different than a traditional mortgage, and the client is not making monthly payments. This means their credit doesn’t play as important a role.
A reverse mortgage works opposite of traditional mortgages. The client doesn’t need income to qualify since they’re not making monthly payments. Traditional mortgages require income to qualify for the loan.
Unlike traditional mortgages, reverse mortgage customers are not responsible for paying back more than the value of the home. If the loan balance exceeds the home’s value, the lender only collects an amount equal to the home’s current value.
Loan proceeds for a traditional home loan are disbursed as a lump sum. Reverse mortgage loan proceeds are available as a line of credit, a lump sum, or monthly disbursements.
When speaking to your customers about reverse mortgage, point out that reverse mortgage programs are excellent financial planning tools for seniors. While some need cash, others have no immediate needs and can use a reverse mortgage to plan for home improvements; vacation homes; long-term care planning; and as a financial cushion for heirs or unplanned events.
Finally, while a reverse mortgage is not a solution to a senior’s short-term financial problems, the longer your client plans to stay in the home the more beneficial a reverse mortgage becomes. Even is they pass away before the loan maturity date, the home’s equity can rise far beyond the loan payoff amount, leaving the customer’s heirs to inherit the remaining value.