Over the weekend, the New York Times featured an interview with Asheesh Advani, the president and chief executive of Virgin Money. Richard Branson, chairman of the Virgin Group, acquired a majority stake in Advani’s company which was formerly called CircleLending.
While Virgin Money may not operate like a traditional bank which lends money, Virgin organizes and processes loans among family, friends, and business associates. One of the products Virgin Money offers is a Retirement Mortgage which operates a lot like a reverse mortgage. To learn more about the Retirement Mortgage you can check out the product here.
According to the NY Times, Virgin Money has originated $350 million in loans since 2001 and has grown 75 percent in the last 11 months. Below is an excerpt from the interview where Advani talks about the Retirement Mortgage.
Q. Are mortgages also character-based?
A. We have two products in mortgage: a family mortgage and a retirement mortgage, which is a reverse mortgage.
A family mortgage enables kids to get a loan from their parents at a lower rate than they could get from the bank. We say you should combine that with a traditional first mortgage so that your blended rate is better than you can get from anybody else. You deduct the interest payments you make to your parents just like you can deduct the interest payments you make to a bank.
Q. There has been concern in the mortgage markets about home equity lines of credit. What is the prospect for a reverse mortgage when there is so much uncertainty?
A. We introduced a product we call a retirement mortgage. It allows the adult kids and the retired parents to do a deal among themselves and keep the home within the family. It’s at least 50 percent cheaper than a bank reverse mortgage.
Q. How do you figure that?
A. Bank reverse mortgages start at $10,000 in cost, and our product is a couple thousand dollars plus $9 a month. All and all, it will be less than 50 percent of the cost of a bank reverse mortgage.
To read a copy of the full interview click the link below.