REVERSE MORTGAGES CAN HELP CLIENTS STAY AT HOME
By Bernie Ockrim
In the recent past, when older people had difficulty living on their own it was a signal that it was time to move in with family members or consider entering a nursing home. But today, for many people, this is no longer the case. Now, your more mature clients can continue to live on their own for years to come, even as they grow older and begin to need help with everyday tasks. This is often referred to as “aging in place.” Americans of all ages value their ability to live independently, but without a plan for aging in place, it can be hard for them to control the future.
Reverse mortgages offer a sensible option that your senior clients can use to remain at home in a financially secure way. Why is this important? Traditional retirement income sources — IRA, pensions, 401K and social security — often aren’t sufficient to cover everyday living expenses and healthcare needs. You can imagine how many conversations are going on in American homes on how to best provide and care for aging parents or grandparents. The solution to many of these conversations can be found in accessing the equity in their homes, which is the basis of a reverse mortgage. The truth is that many seniors are “house rich but cash poor.” This is serious business.
Reverse mortgages are actually loans that allow homeowners age 62 and over to convert home equity into cash while living at home for as long as they wish. Borrowers continue to own their homes and do not need to make any monthly payments. Instead, they can choose to receive the funds as a lump sum, a line of credit or monthly payments for life. The loan is due only when the last borrower moves out, dies or sells the home.
This might be a scary concept for frugal seniors who have spent a lifetime paying down the mortgage and don’t want to be in debt. Their worry is that they might lose their home; however, it is important to stress that, quite to the contrary, reverse mortgages enable homeowners to remain in control of their property and permit them to sell at any time.
Aging in place is an important option for seniors, and there are several ways reverse mortgages can be used to address the many issues listed below that challenge their golden years:
• Hospital/healthcare costs
• Existing mortgage
• Burden on children
• Home improvements/repair
• Property taxes
• Daily expenses
Below are some points that clarify the reverse mortgage, and will help Realtors explain this option to potential clients before encouraging them to visit a mortgage professional.
• A reverse mortgage enables homeowners age 62 and older to convert their home equity into income without having to sell the home or give up title.
• There are no required monthly mortgage payments to make while living in the home.
• Loan proceeds are tax free and may be tax deductible upon loan repayment.
• Reverse mortgages are commonly used to pay off existing mortgages, eliminating the monthly payment obligation.
• Reverse mortgages are non-recourse loans, meaning the borrower can never owe more than the appraised value of the home at time of repayment.
• Advance loan disclosures and loan illustrations are provided at time of application.
• Counseling is required for all reverse mortgage applicants, provided by HUD, AARP and other reputable organizations.
• The bank will never own your home and can never put your client out.
Aging in place is a dignified way to support seniors who want to remain in their homes. Additionally, a reverse mortgage might just be the answer to providing the secure solution that your clients are looking for, whether it is the senior themselves or a family member.
For further information on aging in place, you can contact the National Council on Aging, National Reverse Mortgage Lenders Association (NRMLA), AARP and HUD. Or, contact me directly and I will send to you the latest information concerning this topic.
Bernie Ockrim is a 25-year industry veteran and a Certified Reverse Mortgage Specialist with American Street Mortgage Company In Chicago. He can be reached at 312.376.3760 or by e-mail at [email protected].
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