For years, reverse mortgages have been seen as loans of last resort. However, for some people, that isn’t the case.
Take Grandma Pat from the Colorado western slope. She got a reverse mortgage to take her 3 grandsons on a memorable vacation every summer.
Or James & Judy, who wanted to tap into their home equity so they could do short-term mission trips with their church every year.
Then there are Peter and Wanda, who are funding their long-term care policies from their home equity, shifting the risk away from their estate onto the insurance company.
And John and Joy are remodeling their home using their home equity, updating it so it better suits them as they age in place.
I think of Paul and Peggy, who used their equity to help their children with a down payment to purchase their first home. Now, their children are building wealth through real estate.
My experience is that the sooner someone takes out a reverse mortgage, the better.
For the family that owns their home outright, they can start taking some of their equity and allowing it to grow by compound interest year over year, tax-free. At some point, they can convert these funds to a lump sum or a monthly payout.
Or the couple that has a home that no longer suits their needs. They can increase their purchasing power by 35-45% and move to a newer home, with updated amenities, no deferred maintenance, in the part of town they want to live, in a home that better meets their needs. They make one large down payment and will not have a monthly mortgage payment.
Once a senior homeowner decides to get a reverse mortgage, they often don’t know what to look for in a mortgage professional, as only 4% of mortgage originators do reverse mortgages. Here are some criteria to consider.
-Does the mortgage originator specialize in reverse mortgages? These are unique loans, and if someone isn’t trained to originate them, the process can take longer, and you may end up with a reverse mortgage that doesn’t do what you want it to do.
-Is the mortgage originator a broker or in retail (mortgage company, bank, etc.). This is important because brokers have access to several companies and can shop for you to save you time and help find the best scenario to meet your unique situation.
-What reviews does the mortgage originator have online? Do they specifically mention reverse mortgages?
-Is the mortgage originator listed with the BBB? Do they have an A rating or better? Are they age-friendly certified?
-Has the mortgage originator been interviewed on the radio, podcasts, television shows, or featured in news or magazine articles, or have they written any books to demonstrate their expertise?
-Is the mortgage originator a Certified Reverse Mortgage Professional (CRMP)? There are only 220 in the country, and they have: Passed a rigorous exam; Are committed to a code of ethics put out by the National Reverse Mortgage Lenders Association (NRMLA); Do continuing education each year; And have enough experience to obtain this coveted designation. You can find a CRMP in your state on this site: https://www.reversemortgage.org/About-NRMLA/Certified-Reverse-Mortgage-Professionals/
Considering a reverse mortgage is a big decision, and you don’t want an amateur who doesn’t specialize in them practicing on you. I always tell my clients that there are 4 questions to ask when looking at a reverse mortgage as an option.
- Is this the right time? The right time is the day you qualify. You are old enough (62 years +), have enough equity (35-45% loan to value), live in a single family home, townhome, patio home, 2-4 unit building as your primary home, have clean credit history the past 2 years (if not, there may be another option), and have enough income to pay for the property taxes, homeowners insurance, HOA dues (if there is an HOA), maintenance on the home, most people qualify with their Social Security income or Pension.
- Is this the right program to help me accomplish my goals? If you are looking to unlock and access some of your home equity and not have a monthly payment, a reverse mortgage is the only loan that can do that.
- Is this the right company? I recommend working with a mortgage broker who has many lenders they can shop for you to save you time and money.
- Is this the right professional? If you choose to work with a Certified Reverse Mortgage Professional, they will handle your loan with professionalism, treat you respectfully and close in a timely manner.
If you have any questions or concerns, feel free to reach out.
