The email’s headline was enticing, “Realtor Alert: Seniors can now purchase a home using a reverse mortgage… Learn how to increase your Real Estate Commissions!” A bank invited me to attend their webinar on how people 62 and older can purchase homes using reverse mortgages. Previously, seniors could only get a reverse mortgage on the home they currently owned and lived in.
With reverse mortgages, homeowners borrow part of the equity they have in their property and the principal and interest aren’t owed until they die or move out. Thus, if they use a reverse mortgage to buy a home, they have no payments while they live in the home.
I listened in and followed the PowerPoints on my laptop as a reverse mortgage specialist presented 4 scenarios. By the end I wondered by anyone 62 or older would now use any other type of mortgage to buy a home.
The next day when I was in my branch office I asked our loan consultant, Michael Polera, if Baird & Warner Financial Services offered such reverse mortgages. Michael replied that they do, but explained that he wouldn’t recommend them, unless there was no other option for the buyer. What the bank’s reverse mortgage specialist failed to mention was that these reverse mortgages have very high fees!
I so appreciate that Michael looks out for his clients! If you have any mortgage questions, you can call Michael at 847.818.6029 or email him at michael.polera@bairdwarner.com.
ABOUT THE AUTHOR
Fran Bailey shows, previews and tracks downtown Chicago homes for sale giving her the insights needed to help her clients negotiate the best price and terms. Fran has been quoted in numerous Chicago and national publications. To schedule showings of listings regardless of broker or to contact Fran email her at fran.bailey@bairdwarner.com or call 773.793.4516. Learn More
Fran Bailey, Realtor
{ 3 comments… read them below or add one }
Fran,
Most of the fees which Michael Polera is referring to is the insurance paid to HUD to ensure the borrower never owes more than the property is worth.
So while it’s easy to say that reverse mortgages have high fees, most originators don’t understand them and that is part of the problem. Unless your company specializes in reverse mortgages, it’s rare to see them totally understand the product.
If you take a look at the Total Annual Loan Costs over the life of the loan, even with a 2% origination fee, HECMs are less expensive than typical forward loans. If you would like to see a scenario I’d be happy to email you a printout.
In regards to your question about why any senior would use the HECM for purchase? Ask Michael how a senior who wants to move to Florida can qualify for a forward mortgage off of social security.
Sure maybe she can sell her investments to get some cash, but does she have the money for mortgage payments and monthly expenses?
Living in a house in Florida with no mortgage payment is something most people would love to have.
I’m not saying it’s the product for everyone, but if there is a better solution in this market I’d love to hear about it.
John
Fran,
Sorry I misread this statement… “By the end I wondered by anyone 62 or older would now use any other type of mortgage to buy a home.”
I thought you were saying why would anyone use a reverse mortgage to buy a home?
I apologize… I’m curious, was the presentation that you saw on reverse mortgages through NAR?
Hi John,
The webinar on using reverse mortgages to buy a home was not through the National Association of Realtors. It was done by an Illinois bank.
The fees Michael told me about were much higher than the 2% example you gave. Give him a call. I’m sure he’d be very open to hearing your opinions. You two are the mortgage professionals, not me.