Circle Lending has just released a program called Family Advantage (TM) which they are saying is their smarter version of a reverse mortgage. They describe it as a line of credit funded by the relatives or friends of a homeowner which is secured by real estate. The Family Advantage program program retains the advantages of conventional reverse mortgages and eliminates many of of their costs, restrictions, and drawbacks. So what are the advantages?
- No age restrictions
- No lending limits
- Can be made on 2nd Homes
- Flat fee of $3,999 instead of the typical 2% origination fee
- Servicing fee of $19
According to Asheesh Advani, CEO of Circle Lending, “it enables the homeowner to receive cash knowing that a relative or friend – not an institution – is building equity in the house”. My question is how is the friend or relative building equity in the house when they are still going to have to pay off the line of credit when the homeowner moves or passes away? Also, what happens if the house loses value and the proceeds from the sale are less than the amount of credit that was extended? I wasn’t able to find anything that said that this was a non recourse loan like the standard reverse mortgage.
I give Circle Lending a lot of credit for trying something like this but it almost seems to good to be true. If anyone has more information on the program please send it my way. Below is a link to the press release.