Ron Meier discusses the benefits and risks of reverse mortgages.
Listen to the interview on the Business Innovators Radio Network:
Ron explained, “Reverse mortgages are a special type of deferred-repayment-loans that allows senior homeowners to borrow against the equity in their home. Monthly payments are always optional – not required. Reverse mortgages must be paid back when the borrower dies and the home is sold, or the borrower no longer lives in the house as their primary residence. Reverse mortgages can be a useful financial tool for seniors who need extra money to cover expenses such as medical bills or pay for home repairs. All reverse mortgage borrowers have the same obligation as any homeowner; they must pay annual property taxes, keep homeowner’s insurance in force, maintain their home and pay HOA fees if they live in a covenant community. Reverse mortgage interest rates are competitive with traditional mortgages. Reverse mortgages can have some downsides. For example, when a borrower chooses the ‘no monthly payment required’ option, the loan gets bigger over time. This means there may be fewer real estate assets to pass along to heirs. Another example is if a borrower failed to pay their homeowner obligations, a lender may decide to start a foreclosure since the property is collateral for the loan. Reverse mortgages can be helpful for some seniors, but it’s important to understand the risks before signing on the dotted line.”
When considering a reverse mortgage, people often make a few critical mistakes. Here are three of the most common:
1-Not understanding how a reverse mortgage works.
A reverse mortgage is a loan that allows senior homeowners to convert their home equity into cash. The loan is repaid when the borrower passes away and the property is sold, or the borrower no longer lives in the home as their primary residence. Reverse mortgages can be a helpful way to supplement your income in retirement, but it’s essential to understand how they work before taking one out.
2-Not Taking out a reverse mortgage early enough.
By the time homeowners turn age 62, most have built significant equity in their homes. By understanding how a reverse mortgage works, borrowers understand how they can create a “standby line of credit” inside the reverse mortgage loan that grows at the same interest rate as the loan. Since time is the key component of compounding interest, taking out a reverse mortgage early enables the line of credit funds to grow. This “bucket of money” could be just the solution to pay for future misfortunes or indulgences. Too many borrowers wait to use a reverse mortgage as a “last resort bailout” when they have run out of all other options.
3-Waiting too long to move out of the too-big, 2-story home
Many people do not realize that a reverse mortgage can be used to buy a house. By making a minimum borrower-paid investment of about 60% of the purchase price of a home, borrowers can move into a more appropriate, single-level home and enjoy NO required monthly payments for as long as they live in their new home. Most borrowers will use net proceeds from the sale of their departure home to fund the borrower-paid investment.
Reverse mortgages can be a helpful tool for seniors, but it’s important to get the facts about how this premium financial tool works for your unique situation. Take the time to understand how a reverse mortgage works and shop around for the best deal to make an informed decision that a reverse mortgage may be the right financial tool.
At Bank Of England Mortgage, they deliver outstanding products and the best service in the industry – which leaves them ahead of the competition in the eyes of borrowers. For instance, they provide competitive rates and have some of the industry’s most knowledgeable, professional loan officers. Because of their expertise, they can qualify more borrowers, identify their needs, and ensure that each person buys the loan that is right for them and their family.
Their Goal Is To Exceed Your Expectations. The combination of their excellent staff, superior operations, and devotion to customer service mean one thing to BOE Mortgage: They will not stop until they have exceeded their clients’ expectations.
About Ron Meier
Ron Meier has enjoyed a 35-year career in sales and sales management working in various industries as a top producing manufacturer’s representative, the U.S. Sales Manager for an international manufacturer and Division Sales Manager for two national homebuilders.
Ron is a real estate industry leader having held positions as Board Member, President and the current Education Committee Chair of the Builder Realty Council of Denver, a past Board Member of the Denver Homebuilder’s Association and a past Chair Person of the 55+ Housing Council. Ron has a long history as an Affiliate Member of several Denver-metro REALTOR® Associations.
