HEADLINE:   Let’s do the Math – TOGETHER

In the last edition of the Senior Spotlight, I wrote about price wars that are currently taking place in the Reverse Mortgage fixed rate market. Things continue to heat up, so it is time to take a closer look at how the price wars could benefit you.

To review, a Reverse Mortgage is a financial tool available only to homeowners 62 and older, that allows access to cash (equity in your home) which you may have thought was previously inaccessible.

• You ALWAYS retain title to your home
• You do NOT share appreciation with the lender.
• You make no repayment of principal or interest while living in the home,
• You or your heirs repay the loan when the house is sold or you move from the home.
• You enjoy the benefits of cash flow needed to remain safely and securely in your home for as long as you wish.

Reverse Mortgages are regulated by the government and as such, has limited variability among the lenders.  That is, for the exact same type of loan, the amount of funds you could receive is exactly the same.  So in order to gain market share, lenders are increasing the rewards to loan originators for certain types of loans – those Reverse Mortgages with fixed interest rates.

Several lenders are increasing rewards to the loan originators, making it highly profitable to “sell” the fixed rate mortgage to borrowers even if not in the borrowers’ best interest. One of the downsides of the fixed rate programs is that all lenders require that the borrower take all available funds at close and begin paying interest on the full draw.  This is appropriate in some family situations but not in others.

In receiving the large rewards, the loan originator may pass through cost saving to the borrower or keep the entire increased commission for themselves.  While the government has put in place a limit on the amount of “loan origination fee” that can be explicitly charged (capped at a formula of $6000 for the maximum loan limit), there are currently no rules to limit the amount of rebate a lender can provide outside of the loan origination fee.

That means, that for a borrower who is “short” funds (has more mortgage debt than can be paid off with their current loan qualifying amount), the loan originator now has some flexibility to help pay for closing costs.  Similarly, one lender is offering to directly pay 50% of the upfront mandatory mortgage insurance premium, rather than passing through the loan originator.

But if YOU are not aware of these potential benefits to you, you don’t know to ask or watch for them.  So LET’S DO THE MATH TOGETHER.

Since I represent multiple lenders, I know which lender is offering what deal (and they are changing daily).  AND, I know whether what is being offered has any real value in each your situation.  Some features of loans are better suited to shorter term situations; some are better suited to longer term situations.  Decisions you make at 85 are not the same decisions you make at 65.

So if you are considering a Reverse Mortgage, let’s do the math together and see what is available in the marketplace for you.

Reverse mortgages are a powerful financial tool.  But they may be confusing to a homeowner who may not have had a mortgage for many years.  And they are especially challenging right now during these lender price wars.

If you would like more information on the reverse mortgage options available to you, please contact my office at (650) 591-4430.