VRE 61 image

Should Your Older Clients Buy a House Without Having to Make Monthly Payments?

The retirement boom is on for baby boomers so expect a lot of downsizing in the years ahead as older homeowners replace their suburban house with a condo. Now, how do you respond if you have clients who want to use a reverse mortgage to buy their new place?

It’s not your job to be a financial advisor, but it doesn’t hurt to know how reverse mortgages for purchase work. That way, if a client wants to go this route, you will at least understand the mechanics of these mortgage loans.

VRE 61 imageIn a revese mortgage for purchase, buyers put up sizable down payments and in return get to have their monthly mortgage payments come out of the reverse mortgage rather than their pocket. That keeps their money free for spending on other things. Of course, when they go to sell the house or refinance the mortgage, the amount of the mortgage they’ve used to make their payments is a negative against their equity.

These mortgages remain a small part of the market, but as young boomers retire, many of them might find the option attractive. To help you at least understand how these mortgages work, REALTOR® Magazine is hosting a live webcast on Feb. 22 with a real estate pro and a lender who do a lot of these reverse mortgage transactions, which are backed by the FHA, by the way. If you watch the webcast, you can ask them questions while it’s going on.

A summary of the upcoming webcast is a top story in the latest Voice for Real Estate news video. The video also looks at how the confirmation of Ben Carson to be HUD secretary is going. The video excerpts from his testimony before the Senate Financial Services committee at which he said all Americans should have an opportunity to own a home and that the federal government should maintain a role in the secondary mortgage market even while it encourages private-sector alternatives. He also said the 30-year, fixed-rate mortgage plays a key role in healthy housing markets.

The video also looks at the Trump Administration’s suspension of a planned FHA mortgage insurance premium reduction. The suspension was issued before the reduction took effect, so no one’s insurance premium will go up as a result. But NAR would like to see the reduction put back on the books, because an estimated 40,000 households would be able to buy that otherwise couldn’t.

Another segment looks at last year’s final existing-home sales number. It was 5.45 million, a 10-year high. Expect even more sales this year, but there are two negatives in the market: persistent inventory shortages in many parts of the country and the likelihood of higher mortgage interest rates. Even so, NAR Chief Economist Lawrence Yun expects home sales to rise by 2 percent this year.

Access the video.

Robert Freedman

Robert Freedman is director of multimedia communications for the NATIONAL ASSOCIATION OF REALTORS®. He can be reached at rfreedman@realtors.org.

More Posts

Comments
  1. Great article! Thanks so much for sharing.

  2. Very insightful article. All realtors can really benefit by ensuring they understand the in’s and out’s of reverse mortgages especially if they are in fact set to be come more popular.

  3. The use of a Home Equity Conversion Mortgage can be an excellent way for folks over 62 to purchase a home. This can be especially useful when looking to downsize to a more managable home, or one with amenities better suited for aging in place. However, there can be drawbacks, such as high origination fees, and HECM for Purchase programs generally require a big commitment on the part of the borrower — about 50% of the total cost has to come from the borrower’s other assets.

ADD YOUR COMMENT