Learn about why it’s important to educate yourself about reverse mortgages and be prepared for when you are faced with one.
I am amazed at how many real estate agents are unfamiliar with the reverse mortgage loan product. It’s also called a home equity conversion mortgage or HECM (pronounced ‘heckum’) for short.
The short answer to the definition of a reverse mortgage loan is: A mortgage available to people 62 and older. It’s an FHA-insured loan and it can be used to:
1) Refinance a current mortgage
2) Access equity on a home that doesn’t have a mortgage on it
3) To purchase a home – new or pre-existing
The biggest advantage to the reverse mortgage is that there are no mortgage payments required. This option frees up income to be used in other ways.
Ideally, the interest that accrues on the loan is offset by the rate of home appreciation.
Some people use the reverse mortgage loan because they have a financial need, some have wants, while others are simply using the product as a retirement planning tool.
So, why is this important for real estate agents to know about?
Whether you are specializing in the mature market or not, you are going to encounter home sellers who have reverse mortgages on their current homes. You need to know how to assist them in getting the information they need to pay off the loan when the home is sold.
Under normal circumstances, there is equity in the home and the reverse mortgage simply needs to be satisfied upon closing like any other type of loan. If the balance on the loan is more than the home is valued, the homeowner has various options. As an agent, you need to know what these options are so you can advise your client.
So, what is the best way to learn about reverse mortgages?
There are some great resources out there on this topic. In fact, we recently did a webinar with a reverse mortgage specialist, Lee Smith (NMLS# 969842) of Fairway Independent Mortgage Corp and the replay is available on our website.
You can access it by CLICKING HERE. It’s toward the bottom of the replay page.
BEWARE OF MISINFORMATION
Be cautious when reading articles or listening to stories about reverse mortgages online. There is so much misinformation out there. The articles often make reverse mortgages out to be the “bad guys” leaving out relevant details like homeowners who fail to pay their property taxes or keep their home insured!
NOT ALL LENDERS SPECIALIZE IN HECM’s
Just like ill-equipped real estate agents who may dabble in selling properties outside their regular scope of practice (and make the rest of us crazy in the process), some loan officers will take on a reverse mortgage – even if they aren’t specialists in that product.
We recommend that you talk to a lender who specializes in reverse mortgages. Avoid those who ‘can’ do them and talk to those who DO in fact do them frequently and successfully.
To learn more about specializing in the mature market, reach out to us at 512-842-6011.