Financial advisors have been long skeptical of reverse mortgages due to perceived high risks involved for their clients, but with recent changes to the program and application process, it may be something to revisit, according to a recent article from WealthManagement.com.
For the sake of their clients, financial advisors should be aware of the unique situation a reverse mortgage could help certain homeowners with, explains the article written by Kevin McKinley, an independent registered investment advisor and owner of McKinley Money LLC in Eau Claire, Wis.
“Getting a reverse mortgage is usually easier than getting a traditional mortgage, home equity loan or home equity line of credit,” he writes. “But applicants still have to jump through a few hoops. Along with the aforementioned home equity, applicants must also have enough income or assets to pay for future maintenance, property taxes and other ongoing basic expenses.”
Though, there are a few drawbacks he points out that clients of financial advisors should be aware of to make sure they don’t get in over their heads.
The fees that are associated with reverse mortgage transactions are an important aspect to be aware of because they can vary greatly from one lender to another, McKinley points out in the article.
“Borrowers should expect to pay several thousand dollars in origination fees, mortgage insurance premiums and closing costs,” he writes. “True, those expenses can be taken from the proceeds of the reverse mortgage, but that will mean there is a sizable gap right from the beginning between how much clients receive from the reverse mortgage and the amount borrowed.”
Read the full article at WealthManagement.com.
Written by Alana Stramowski