Reverse Mortgages

A Reverse Mortgage could be just the ticket to enjoying a better quality of life in your retirement years.

Reverse Mortgages are helping older Americans across the country achieve greater financial security. Imagine having extra income every month for the rest of your life. Would the security of having an open Line of Credit with no repayment schedule give you peace of mind? Have you dreamed about a lifelong vacation but never seemed to have found the time or the money for it? All this and much more is possible by using some of the equity in your home as part of a well balanced retirement plan.

The thought of a reverse mortgage can fly in the face of reason at first glance. After all, most people have spent a good deal of time and effort trying to eliminate their mortgage. Is it the mortgage or the payments they’ve wanted to eliminate? For most, it’s the payments. So far so good, a reverse mortgage has no payments due during the term of the loan.
Many people consider their home as an investment. The trick has always been how to tap this investment without giving up the shelter aspect of the home. The traditional way of doing this has been to refinance to a larger mortgage or take out a home equity loan. The problem is, both of these options incur an immediate repayment schedule and in most cases extend the length of time payments need to be made. Just the opposite of what people want.

Encyclopedia Britannica defines investment as the process of exchanging income during one period of time for an asset that is expected to produce earnings in future periods. Thus, consumption in the current period is foregone in order to obtain a greater return in the future.
Is the future now? If so, a reverse mortgage allows you to get some of the equity out of your house and into your pocket without any repayment schedule for as long as you have the loan. The proceeds are tax free and can be used for any purpose you want.
What are the requirements in obtaining a Reverse Mortgage?
There are really just a few. The youngest borrower must be at least 62 and the home or condominium needs to be the primary residence to qualify for a reverse mortgage. In addition, the property must be maintained, taxes must be kept current and homeowners insurance must be in force for the loan to remain in place.

How does a reverse mortgage affect Social Security, Medicare or Pension benefits? The proceeds from a reverse mortgage do not affect any of these benefits but it’s always best to consult a financial advisor and or legal counsel. There is also no effect to SSI or Medicaid benefits as long as the monthly cash advances are fully spent every month and not accumulated. Guidelines do change so again please consult with a legal advisor and/or your local Agency on Aging.
How Much Money Can I Get?

The size of a reverse mortgage granted depends on the applicant’s age, the type of reverse mortgage sought, the home’s value, and the current interest rates. As a general rule the older the borrower and the more equity in the home, the larger the cash proceeds. Overall a reverse mortgage pays out anywhere from roughly 40% to 85% of the appraised value or FHA loan limit, whichever is smaller. The balance of the equity is retained in the house.
Currently there are three reverse mortgage products available. The government-insured Home Equity Conversion Mortgage (HECM), the Home Keeper product by Fannie Mae, and the Cash Account plan. The Cash Account product provides increased benefits for higher value properties (typically homes valued over $600,000).

The HECM product is insured by HUD and the FHA. This product represents over 90% of all reverse mortgages. HECM loan limits vary by community and are set by the FHA. The current loan limit for Hampden, Hampshire, and Franklin counties is $206,700 for a single family house. Loan limits in the Connecticut counties of Hartford and Tolland are $333,735 for a single family house.

How Can I Access the Money?

You can receive the proceeds from a reverse mortgage in any of 3 ways.
1. As a Lump Sum
2. As a Line of Credit
3. As a monthly Tenure for life or for a specific period of time.

You can also elect any combination of these. About 65% of the time people elect a Line of Credit and for good reason. The Line of Credit option for the HECM product has a growth factor. The unused portion of the Line of Credit grows at 2% more than the 1 year T Bill. This makes the current annualized growth rate almost 7%! It’s like having a tax free interest baring savings account that has a high growth rate with guaranteed security. This is an incredibly powerful feature of the Line of Credit option.

What Are The Costs?

The actual closing costs depend on the type of reverse mortgage you elect. A rough estimate for the most popular HECM reverse mortgage is about 5% of the appraised home value or the FHA loan limit, whichever is less.

Almost all costs of a reverse mortgage can be financed from the proceeds of the loan. These typically include an origination fee, closing costs, servicing fee and a mortgage insurance premium.
Why is there a mortgage insurance premium? The mortgage insurance is there to protect you. You are protected in the following way: All reverse mortgages are considered non-recourse loans. This means that no matter how high the loan balance grows, neither you nor your heirs ever owe more than the home’s market value at the time the loan needs to be repaid.
Servicing fees refer to a monthly fee charged by the lender to service your reverse mortgage. This is what’s called a “service set-aside” which is an estimate of the total monthly fees for the life of the loan. This estimated “service set-aside” is deducted from the proceeds you would qualify for and is set aside for the lender to pull the monthly fee from. There is no interest charged to you for this “set-aside” and if the reverse mortgage is refinanced, or paid off, any remaining “set-aside” funds are added back to your equity.
Closing costs are consistent with other types of mortgages and include lawyer’s fees, home appraisal, pest inspection, recording fees, etc. Origination fees are charged by the company who originates your reverse mortgage.
A free counseling session is also required by a qualified HUD office. There are several in the greater Springfield area. This counseling can be done via phone or in person.
Common Misconceptions
The lender gets your house. This is not true, the title always remains in the name of the borrower. When the loan is due, the borrower or the heirs pay back the cash advances and the accumulated interest.
All the value in your house gets used up. Although it’s true the loan balance increases with time as interest accrues, people forget that in most cases the home value also continues to increase with time. Generally speaking, this preserves the equity that remains after the reverse mortgage proceeds have been paid to the borrower.
You won’t qualify because of poor credit, lack of income, or poor health. This simply is not true, the loan is not dependent on any of these. It is true a credit report is run but only to check on potential government liens or tax liens.
You have to be mortgage free. Although the reverse mortgage needs to be in the first position you can use some of the proceeds to pay off the existing mortgage assuming it is less than the amount you’ll receive from the reverse mortgage. This eliminates your existing mortgage and your payment.
Only desperate people get reverse mortgages. At one time that may have been true. But today’s reverse mortgage borrower is more likely to get a loan out of want, rather than need. Furthermore, the ability to access tax free cash to put to work somewhere else has been a trait of savvy investors for years. In addition, a growing number of people take out reverse mortgages because they like the security of having a financial cushion or for planning future expenses. Don’t let an antiquated stigma keep you from getting the cash you want. After all, it’s your money.

Is a Reverse Mortgage Right For You?

Borrowers have many specific reasons for electing a reverse mortgage. Some are needs-driven, others can enhance the quality-of-life. AARP, in conjunction with HUD/FHA, completed a survey of homeowners who elected a reverse mortgage. Here are the results.

67% Hospital/healthcare costs

55% Repay existing mortgages

50% Reduce burden on children

50% Home repair/improvement

38% Pay property taxes

29% Daily expenses

14% Travel, something special

3% Gifts

Because it’s not a cheap loan, a reverse mortgage is not the best way to pay off a small debt. Again because of the closing costs, this is not a particularly good loan if you intend to occupy your home for less than 4 to 5 years.

Most people love their home. They’ve put a lot of themselves into it, perhaps raised a family there, have worked hard to keep it in good repair, lived, loved, laughed and cried there. The home is one of the largest financial commitments you make. And it represents one of the biggest and often overlooked sources of your financial health.

The ability to remain in your home while taking care of yourself financially is important to many of us. A reverse mortgage can give you that opportunity. If you could benefit from the extra cash to supplement your existing income, reduce credit card debt, cover medical expenses, help a loved one or just enjoy life a bit more, a reverse mortgage may be right for you.

Reverse Mortgage Agents Need Patience to Work Leads

So, you decided to start selling reverse mortgages in the last couple of years, bought yourself a bunch of cheap internet leads and ran out to meet the world. You probably received the first lead and called on your first prospect for this particular project and felt the sting of rejection. As a professional salesman, you picked yourself up and undaunted called on the second prospect. Same result.

This is is a common story among new reverse mortgage agents, especially those who have a background in selling traditional mortgages. Many times the salesman turns a good lead into a dead end by ignoring the obvious difference between the products and, more importantly, the customer. Reverse mortgages are about people.

Consider the following when you work your reverse mortgage leads:

Direct mail reverse mortgage leads are the best way to reach seniors and earn their trust. The senior organizations have websites, that are wonderful, but the power of mail and the printed word on paper resonates far more strongly with senior, particularly older seniors, many of whom do not even have a computer. It has been this way for years. And in the reverse mortgage industry direct mail is a great way to create a reverse mortgage lead. Any serious senior market market lender that does not have direct mail as part of their marketing mix is restricting their on revenue.

There are significant differences between any two financial products. Everyone in the mortgage industry knows that is is naive to think that all loans are created equal. This is especially true when comparing reverse mortgages to conventional loan types (Equity Loans, 30-year Mortgages). Although there are similarities that can be used when interacting with your client, key differences are apparent. The differences between the products makes a difference starting with the lead generation process.

Telephone leads, although which can be effective are still cheap leads by comparison, it works out to be the same numbers game and internet leads are typically very unreliable. These are facts that are captured by the pricing. A direct mail reverse mortgage lead let’s you know that the prospect was willing to get out to the mailbox twice to get the information you have. The relationship starts there.

Let’s say you order 100 Direct Mail Reverse Mortgage Leads from a reputable vendor that has at least 20 years of experience working with the senior market and knows how to generate a demographically appropriate list or eligible seniors. The average loan officer should be able to close 10 and work another 5 that you may close later. A more experienced sales person would take those same leads and close 20 to 30. This is a huge difference on the return on investment.

Let’s look at a few key differences:

Difference #1
The average age of a reverse mortgage customer is 74.

Difference #2
The sales cycle for reverse mortgages is much longer. From the time a lead is generated until the time of closing could easily be 3 months. This means reverse mortgage leads are the beginning to long relationship.

Difference #3
There are a lot of myths about reverse mortgages and sensational stories that distort the qualities of the reverse mortgage product. Those are the stories that seniors see in the newspaper and on TV. This is a “new” product to anyone who doesn’t know about it.

Difference #4
Very few reverse mortgage professional professionals have more than 5 years experience selling reverse mortgages. As a result, very few reverse mortgage professional have rich experience with the senior market. (Annuity Professional and Life Insurance Agents sometime have valuable experiences that help them proved better service.)

Difference #5
Seniors expect and deserve respectful, considerate, and patient contact. This market is built around the sit down at the kitchen table generation as opposed to today’s fast food nation.

These five differences are so incredibly important that it shocks me as a long-term sales person, who has worked door-to-door sales, that agents in the field are unaware of the implications and the impact is has on the way a customer is approached and the way a loan is closed. I’d like to address these issues below.

Good reverse mortgage lead generators know this, because we see thousands of leads a month and build the mailing lists for the campaigns, because we have experimented with all types of lead generation systems over the years and have the statistics on the results.

What can loan officers and agents do to increase Conversion Rates on Reverse Mortgages Leads:
It is essential address the demographic and product difference in logical manner and keep the customer first in you actions. to an extent the customer leads you to the appropriate decisions as much as you lead them.

In direct mail reverse mortgage lead generation two to three weeks may elapse between the time the customer fills out the lead card and request assistance with their finances. Sometimes people forget things. Kids forget thing and adults forget things. There has been more than one study complete about how we tend to become more forgetful as we get older. You need to be prepared to deal with age related factors,

Here is a group of solutions that will work for you, when you are ready to increase your closing rate.

Solution #1: Order Leads in the Right Area:

When you order your leads, you should order them in an area that you really work in. The same way a real estate investor should buy property in neighborhood they are close to on a regular basis.

Solution #2: Meet Face to Face at the Start of the Sales Process
Remember one of your first goals is always to get in front of the customer. Shake their hand and start a personal relationship. Remember you will be in a position of trust for the next couple months (especially if this is a FHA or HECM loan that requires counseling) and you are talking to someone about the future of a home that they already have equity in. Bring your literature and business cards with you and set an appointment. You are another person in the neighborhood. This is old school, but familiar to older Americans. If there is a no soliciting sign, call from your cell phone and let them know that you are delivering the information requested. The principle here is why should senior prospect have to make a minute for sales person who hasn’t made a minute for them. Go a little out of your way.

Solution #3: Present the Lead Card, Letter, or Application to the Senior Homeowner
Anyone can honestly forget a postcard they mailed out, but almost no one forgets their signature. It is a good way to jog a persons memory and bring them back to the moment when the filled out the card. You can’t do this over the phone and you can’t contact a senior by email that doesn’t use a computer at home.

Solution #4: Let the Prospect talk to You About Their Needs and Issues
If you want to be listened to, be a good listener. The product you have is intimidating to many, so you need to understand what concerns they have so you can concentrate on addressing those in clear and unambiguous terms. Ask the project about how they do things in their life and gather information, before making recommendations. Show respect for your elders. There is no reason to push seniors around to prove that you know what your are talking about. You can control a conversation, while still providing your customer with the utmost respect.

Solution #5: Focus on the relationship early
New reverse mortgage agents want to work a leads fast and clean and need to learn that when they are selling a reverse mortgage they are likely to be in interaction with the borrower (and spouse if present), adult children (who are also poorly informed about the product), and FHA or HECM counselors. A reverse mortgage effects a lot of people most of whom are uncomfortable with the product. With a solid agent to client relationship you will be able to use well-earned trust to take you from the kitchen table to the closing table.

Solutions #6: Debunk Reverse Mortgage Myths
Provide factual information and dispel common myths. the senior homeowner who filled out the reverse mortgage lead card will need to be able to respond to friends and family, who may criticize the decision from lack of knowledge. Prepare the senior prospect for counseling.

Solutions #7: Never Misrepresent the Product or Mislead the Consumer

This should go without saying. Anyone who does not know this should leave the business entirely. That is unprofessional salesmanship and could result in loss of license.

Conclusion:

Many people with a traditional mortgage background, come into the mortgage industry with the idea that you just call people to start the relationship or they walk through your door all on their own. That is the rare case of a true organic lead. Non-traditional products have few organic leads associated with them. That is why they are non-traditional.

Reverse mortgage leads are a start to a relationship. The salesperson must complete the sale. Otherwise, there would be know need for salesman, because the lead generation company would have already closed the sale. Salesman are paid for performance and improve with patient practice towards perfection.

As as a reverse mortgage lead generator, I find that financial advisors and annuity salesman, are often better prepared for the relationship sales process and have better closing rates off direct mail reverse mortgage leads than those jumping straight from a traditional mortgage background.

This has a lot to do with the way the insurance industry sales process worked for many years and the fact that many financial advisors have been trained at some point by a experience professional door to door sales man who knows how to get in front of the customer. Mortgage sales people have more of a bankers attitude and wait for people come to them and close themselves and little intent on maintaining a relationship.

Reverse mortgage are a great product for a salesperson willing to put in the time and work a program that has success and high conversion rates at its core.

What is a Reverse Mortgage?

Another name of reverse mortgage is lifetime mortgage. This is a type of loan that is given only to the senior citizens. This loan can be utilized to make your home equity in the property free in lump sum or in multiple payment modes. The best part of this reverse mortgage is that the responsibility of the home owner to repay the loan amount can be postponed till they die, or the home is auctioned or if the owner leaves the house.

In the normal mortgage the owner of the home has to make monthly EMIs decided by the lender and after every repayment of their mortgage the equity of their property increases and after the mortgage is been paid in full (i.e. after 30 years) the lender releases the property and hands over the property papers to the owner of the home. But in the reverse mortgage the borrower does not have to pay any EMIs and the entire interest is being added to the property’s lien. However, if the borrower receives any EMIs or huge repayments for their available equity percentage then the liability on the property will automatically get increased every month.

However, if the property value increases after the reverse mortgage then they are allowed to take another mortgage over the increased equity of the house. But for some country like United States of America reverse mortgage means conventional mortgage on the property.

The additional fund that will be gained through the reverse mortgage can be utilized for any purposes. Some of the purposes are paying off the unsecured debts and any other debts, Home repairing and home renovation, expenses for living, traveling, long term care or any health care, lessening the financial burden on your children, further educational studies, also for your hobbies, and also for rising property taxes.

According to a report it has been found that the biggest figures of this reverse mortgage come from Arizona, Florida, and California. This reverse mortgage is very popular and helpful for the senior citizens who can not repay their loan amount, this mortgage provide great help to those people, this is just like a special loan for the elderly people. This is very helpful for the elderly people because if they take this mortgage then they can ignore making monthly payments for the loan.

There are certain things that you have to keep in mind while taking reverse mortgage. First is when the foreclosure intimidates then it is essential to act quickly. Home foreclosure should be considered seriously. If you home is foreclosed then your credit rating will definitely drop down by 250 to 300 points for nearly about 8 to 10 years. Moreover, a senior will never overcome from it and will lose his/her home. So there are many things at stake. If this is the reason then why a senior citizen can not pay off their loan amount that is been taken against their property, in such case the reverse mortgage will really help those elderly people.

If your loan repayments are three months behind, then it is very important to act very quickly and try to get in touch with with your lender. As soon as the proposal comes from the borrower (i.e. you) then immediately they have recommendation regarding solving your financial problem by providing you with loan. On the other hand the lender will definitely perform at the level best to ignore foreclosure procedure.

So it is a great notion to pay off your current mortgage with the help of the reverse mortgage, if you decide to pay off your current loan with reverse mortgage then it will also help you to ignore the monthly EMIs. If you think this process is enough to carry an elderly people over their financial problem, then definitely taking a reverse mortgage will worth them.

Second is who can qualify for this loan. It is also recommended that before you obtain this loan you should know properly What Is Reverse Mortgage? There should be sufficient equity left on your property to take this loan. This means that the credit rating and the income level of the elder people does not make any sense and are not even asked when they take reverse mortgage. The only thing that qualifies them to take this loan is their age which should be over 62 years and should be the owner of the house.

Third is what the real help from this reverse mortgage is. It is really a great help for the elder people who are in need and want to eliminate their financial problems. With the help of this reverse mortgage a senior can change their home equity in to cash amount, and this process is too easy and simple which on the other hand help them to ignore losing their home and also a good credit score will be maintained. With this reverse loan the borrower still remains the owner of their home.

In this reverse loan there is a limitation of borrowers, a lender can only lend money to three persons of the same property. Another important thing is that the three borrowers should not be relatives to each other; they should have blood relationship with each other and should also be the owner of the property. Of course the same criteria is applicable for all the people i.e. they should have complete qualifications, they should be an American citizen and above 62 years.

Fourthly, you might be wondering that from where a senior can get help. But the United State of America had prearranged this facility in magnificent way. If you are interested in such type of loan then you should approach the federal counselors for the same, they are many counselors available nowadays all over the country. The best thing is that these federal counselors do not work for the lenders and they are not in the payroll of the lenders. These counselors are totally free and independent to offer and guide you with accurate information regarding reverse mortgage.