A reverse mortgage is not for everyone. Our goal is to work with trusted financial and legal advisors to help determine if a reverse mortgage meets the needs of your client. We can accomplish this by providing detailed loan scenarios to you (with your client’s permission) and personal consultation with our staff to reach a decision that is in the best interest of all parties. We are up front with all our clients about the advantages and disadvantages of a reverse mortgage.

Advantages

Reverse mortgages provide many advantages for senior borrowers. Here are few of the advantages:

  • 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 (taxes, insurance and maintenance must also be timely paid)
  • Can provide a source of income while borrower allows investments to recover from market losses
  • Improves a senior’s standard of living or allows them to live out their dreams
  • Provides the option to pay off an existing mortgage which, in many cases, frees up thousands of dollars in monthly payments or prevents foreclosures
  • Eliminates monthly mortgage payments
  • Allows the senior to maintain their independence while living in their own home
  • Provides money for in-home healthcare or medical expenses

Disadvantages

Disadvantages associated with a reverse mortgage include:

  • Some of the equity is spent that would otherwise be passed on to children or the estate
  • Loan balance will increase overtime
  • Equity decreases overtime
  • Eligibility for needs-based programs (i.e. Medicaid) may be affected
  • 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
  • More expensive closing costs and insurance. This means that the borrows should plan on living in the home for several years to reduce overall costs

The Ideal Client

While there is no ‘ideal’ reverse mortgage client, there are common characteristics you can look for in a prospective reverse mortgage holder.

Here are a few:

  • Cash poor, house rich
  • Has a desire to improve their lifestyle
  • Is not concerned about spending equity that would go to their estate
  • Has taxable income they wish to postpone and instead access proceeds from a reverse mortgage that are not subject to personal income taxation
  • Understands that their home is a retirement asset in which they live and wishes to leverage their home to improve current lifestyle

This does not constitute tax or financial advice; borrower(s) should consult a tax or financial advisor for his/her specific situation

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Special Webinar: How to Use Reverse Mortgages to Secure Your Retirement

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I am a Residential Mortgage Planner with special emphasis and training on Reverse Mortgages. Unlike a traditional loan officer, my role is to help my clients integrate the loan that they select into their overall financial plans to help minimize taxes, improve cash flow and minimize interest expense. I help my clients successfully manage their home equity to increase liquidity, safety and rate of return.

Office: (302) 260- 7088
Direct: (410) 868-0423
Fax: (866) 950-3046
Email: gaila@fairwaymc.com


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