Tucker’s Tip #23-2011
Tucker’s Tips – Real Estate Advice for Realtors & Lenders
Reverse mortgages have over the years received some “bad press.” It’s true they may not be a good product for certain seniors. But there are numerous instances where reverse mortgages make good sense for a particular situation.
A new product, the Reverse Mortgage Purchase, does in certain situations offer a great opportunity for the senior citizen (at least 62 years old) who is buying a new home for their primary residence. Normally the Senior Purchaser would pay a 20% down payment and get an 80% conventional loan with monthly payments for thirty years. With a Reverse Mortgage Purchase, this Senior Purchaser could increase the down payment to qualify for a Reverse Mortgage and never make another monthly mortgage payment.
In one specific example, a Senior Purchaser increased the down payment from 20% to 30% and qualified for a Reverse Mortgage. By paying an additional $20,000 down payment, the Purchaser was able to get a $140,000 Reverse Mortgage to purchase a $200,000 home. Obviously the facts described in the example are illustrative of that particular transaction (appraisal of house, age of borrower, etc), but they are representative of the possible benefits.
Remember, Reverse Mortgages are not for everyone. They are slightly more expensive than a conventional mortgage. Also, at the termination of the Reverse Mortgage (the death of the owner or the vacating of the house for more than a year, ex. moving into a nursing home) the Reverse Mortgage has to be paid if the heirs want to keep the property. If they do not keep the house, there is no liability owed to the bank. But in more and more circumstances, these issues are far outweighed by the advantages. The best advice is to consult with an experienced Reverse Mortgage loan officer to see if this product may benefit the Senior Purchaser.