Most of my new referral partners (finacial advisors and estate planners) already know the incredible advantages of a Reverse Mortgage Line of Credit. They already see the benefits for their clients of additional tax free income, an emergency cash reserve and the value of paying off existing mortgages to increase monthly cash flow. However, some of my friends have wondered, “what are the requirements for seniors to qualify for a reverse mortgage?” So here are Reverse Mortgage “basics”.
What is a reverse mortgage? A reverse mortgage loan is designed for homeowners 62 and over to unlock a portion of the equity in their home by turning it into tax-free* cash with no monthly mortgage payments**.
How could a reverse mortgage help your client with their retirement portfolio? A reverse mortgage provides a potentially inexpensive, easy to-qualify, tax-free*, liquid cash reserve for various uses.
How much does a reverse mortgage cost? Much like traditional mortgage costs there are costs associated with originating the loan. Borrowers are charged an origination fee, a mortgage insurance premium (MIP), an appraisal fee as well as standard closing costs. The great news is that some of these fees can be capped and financed through the loan proceeds.
What are the qualifications?
- The youngest borrower on title must be 62 years of age or older. A non-borrowing spouse may be under 62.
- The home must be the borrower’s primary residence. (Although 2-4 Units can be financed.)
- The home equity must exceed 40% in most cases, depending upon the borrower’s age.
- The borrowers will undergo a financial review to ensure they are able to comply with the loan.
According to AMERIPRISE SURVEY 47% of respondents plan to use home equity to help fund their retirement.
However a BOSTON COLLEGE CENTER FOR RETIREMENT RESEARCH states that 74% of retirees will fall short of their income needs at 62 years old.
So Reverse mortgage loans aren’t just for people struggling to keep their homes. Reverse mortgages can also work for financially comfortable retirees looking for additional retirement security in order to avoid selling other portfolio assets at the wrong time or under duress.
The Reverse Mortgage Equity Line of Credit is a dynamic financial tool that should be discussed with clients to help them reach their retirement goals.
Call me for more details or to consider the individual needs of your client. And if you like this article, please share it.
Albert Jones / NMLS # 1001865 / Albert@BabyBoomerLoans.com