Realtors need to know about reverse mortgages. That’s the message behind an Inman News column this week speaking to Realtors about the use of reverse mortgages by retirees to purchase new homes through the Home Equity Conversion Mortgage for Purchase program.
While press it not often given to this particular loan group, which in November became available in every state through the addition of the HECM for Purchase in Texas, Inman columnist Bernice Ross outlines the need-to-know items for Realtors who may be considering recommending the loans to their clients.
Ross, who writes regularly on real estate topics and has a daily real estate show on iTunes, cautions reverse mortgage pitfalls including the fact that the residence must be owner-occupied and that couples for which only one borrower is named on the loan can run into trouble. However, she also notes they can be a “godsend” for the right clients.
“A reverse mortgage can be a godsend for a senior who is struggling to pay for medications, food and other necessities,” Ross writes. “When someone loses their spouse and the estate was not set up properly, the survivor may have to pay capital gains tax on the amount of the gain. Since he or she often doesn’t have the savings or other income necessary to pay the obligation, the survivor ends up losing his or her home.
…This is where a reverse mortgage can be a wonderful way to let the surviving spouse meet the tax obligation, have no mortgage payments, and still stay in the property.”
But less conventionally, the reverse mortgage can also be used in a new home purchase scenario, she writes, an option that is little known by the Realtor population but has been brought to her attention by the reverse mortgage lending community.
“If you have clients who are 62 or older, have at least a 50 percent down payment, and are willing to accept negative amortization, they can purchase the retirement home of their dreams with a reverse mortgage,” she writes. “Best of all, there are no payments and no qualification making this an ideal way to let mom keep her home or purchase something new if she wants to move.”
Written by Elizabeth Ecker