Like a reverse mortgage the loan either pays a monthly payment to the home owner or allows the home owner to stop making monthly payments all together. Either way, I think for a large number of people out there this really is the holy grail and can completely change their lives.
Many senior citizens are on a fixed income, and their life styles are at the mercy of what’s left over at the end of the month, greatly curtailing their lifestyles. All the while they have a tremendous amount of equity literally sitting in their homes.
Conventional wisdom says pay off the home, and keep it paid off. But unless the main goal is to transmit your home’s equity to your heirs, why would you simply leave your home paid off? The equity in your home is not going to do much for you after you have this life has passed, right?
Well, this life is here and frequently an extra $1000 or $1500 per month is the difference between the “same ole” “same ole” and really getting out there enjoying things. Don’t they call this period the Golden Years? Yes, yes they do!!
The way a reverse mortgage purchase works is simple. You own your home, and it’s time to downsize, you have alot of equity, or perhaps even the home is paid off. It’s time to get something smaller, something with less upkeep and perhaps newer. With a reverse mortgage you can take the equity from your old home, and buy your new home using the reverse purchase and depending how much you put down you will either receive payments or have zero payments. Either way, no monthly payments ever.
This is not a smoke and mirrors product, if you need to sell, you can sell, the equity remaining in your home is still yours. You are still the deed owner, so the flexibility of ownership is still yours…
One very creative thing I would do, if it was me is the Reverse Mortgage Equity Line of Credit. I see this as spectacular way to get into flipping houses (carefully), I personally have never had a client lose money on a flip.. Some are better than others, but this is a great way to generate income using your home equity. The panacea.. again, no payments.. So say you find a townhome that you can buy for 80K, in a decent area. Knowing the area you know you can sell it for $150K after you put a little but of work into it. Great profit right? Yes, it is! The kicker!!? Not a penny out of pocket to buy the flip, nothing out of pocket to repair, and no payments in the interim. For the savvy person this is huge, you can do it again and again and again.
Either way, for those at the right point in their lives (minimum of 62) and with the right circumstances, and when I say “right circumstances,” this is VERY broad, I think about 40% of the homeowners out there probably have the “right circumstance,” this product can greatly improve their lives – not to mention offer many more life possibilities.
A step closer to happiness is good in my book.
Kris Weaver, Broker