Reverse mortgages are making a comeback. While they’ve been called “America’s most hated home loan,” by Bloomberg, the reverse mortgage industry is working to change its image from being seen as a “last resort” for seniors looking to retire, into a positive and viable option.
This should be good news to senior homeowners in need of funds. The personal touch and the ability you have to work with a good reverse mortgage lender every step of the way gives you an edge in making the big reverse mortgage loan decision. Loan officers who are competent and knowledgeable know all about them – not just what they are, but how they are used, how they’re regulated, and when not to offer them. This in part accounts for reverse mortgages’ rise in popularity.
To start you’ll need a primer on what a reverse mortgage is, its various types, and who can use it, focusing primarily on the most popular form of reverse mortgage: the Home Equity Conversion Mortgage (HECM). Then you’ll want know the different proceed options the borrower has under a HECM, followed by some of the regulations that govern reverse mortgages. You should also make yourself aware of the many reverse mortgage scams that are commonly used to prey on the elderly.
We’ll start by refreshing your memory on what reverse mortgages are. At the very basic level a reverse mortgage is a loan. More directly, it’s a type of loan that is only available to eligible seniors and is borrowed towards the equity in their primary residence. The key to eligibility lies in the equity, and how much equity the borrower has will determine whether they can use a reverse mortgage (typically at least 50%.). As you know, when a reverse mortgage is taken out the homeowner borrows against the equity in their home and converts it into cash income, with no monthly mortgage payments, to live on for as long as their equity will allow.
- The reverse mortgage borrower must be 62 years of age or older
- The home is the borrower’s principal residence
- They own their home outright or has plenty of equity
- The borrower is not delinquent on any federal debt
- They have the economic ability to continue paying for their property taxes and other obligations
Aside from the many benefits available through the use of this loan, two primary reasons for its appeal is increased income and disappearing mortgage payments. Another huge advantage of reverse mortgages is the ability for seniors to stay in their home. They aren’t forced have to see the family home they’ve spent years of their lives in sold to someone else; instead, they can enjoy their retirement years in the comfort of their own home. This fact alone can lead many seniors to consider reverse mortgages as the basis to their retirement plan, and they need a good loan officer who can properly guide them through the process.