A recent statistical survey showed that only 3% of senior home buyers were even considering using a reverse mortgage to the make the purchase, compared to 48% who were planning to use a conventional mortgage. But why is this?
The Reverse Mortgage for Purchase program is not new, but knowledge about it is. This program efficiently wraps the home purchase and the reverse mortgage into the same transaction allowing the home buyer to purchase the home they want AND live mortgage payment free as long as they live in it. Available to seniors 62 and older, reverse mortgages are available in various forms – a lump sum, monthly installments, a line of credit, and yes, even a home purchase. The first options are widely advertised and information about them is broad. But the last option, the home purchase option, is still relatively unheard of.
Here’s why I think this home purchasing tool is so broadly under-utilized:
• Realtors aren’t educated enough on the option, therefore they don’t suggest it. When someone is considering purchasing a new home, the realtor is often the first point of contact. If more realtors understood how this powerful program works AND how it can help their own bottom line, it would be used more frequently.
• Buyers are starting with a conventional mortgage company seeking pre-approval to determine how much they can obtain a loan for and how much the payment would be. Even if the buyer has taken this route prior to looking at homes, they should still be informed about the Reverse Mortgage for Purchase program for two very important reasons. One, it increases their purchasing power allowing the buyer to shop in a market that may be well above what a conventional mortgage would approve. And two, they will live mortgage payment free unlike is possible with a conventional mortgage.
• Cash home purchases are very enticing. For buyers considering using cash from retirement, inheritance, insurance, another home sale or asset liquidation the idea of being able to buy a home outright is gold. Again, two problems can be encountered here. One, the housing market is booming and a cash buy often results in less home, while a reverse mortgage will contribute to the cost of the home allowing for more house for less money. Two, these seniors will tie up all their cash in a home making them “home rich” but “cash poor.” The reverse mortgage purchase allows the buyer to keep a hefty chunk of their cash, or combine the home purchase with other forms of a reverse mortgage, such as a line of credit.
There will always be senior home buyers that are not a fit for the Reverse Mortgage for Purchase program, but any professional in the real estate industry is doing a disservice to not make sure their clients understand this option. For more detailed information about this program, click here. Retirement Funding Solutions often hosts detailed webinars open to all real estate professionals. If you’re interested in being informed when one is scheduled, subscribe to my e-newsletter and you will receive the notices directly from me.
Janis Layman is a Reverse Mortgage Specialist serving the Seattle, Lynnwood, Edmonds, and Shoreline areas of Washington. Contact Janis and learn if reverse mortgage is right for you.