TAKE IT FROM YOUR UNCLE — REVERSE MORTGAGES FUND FINANCIAL GOALS
“Reverse mortgages emerging as retirement planning tool for high-net-worth homeowners,” a recent KDH news headline reads. Dionne Warwick might ask, “What’s it all about, Alfie?”, but the answer is far from puzzling. While in earlier years, KDH explains, reverse mortgages were associated with retirees facing financial hardship, today, affluent homeowners use them for strategic financial planning.
It is to be noted that, over the past six years, in this Shift Into Reverse blog, we’ve been mainly referring to federally insured reverse mortgage loans, there are also proprietary, so-called “jumbo” reverse mortgage loans available for use by high-net-worth homeowners. As “private” loans, these “jumbos” allow homeowners younger than 62 to leverage their home equity, and also allow access to a larger percentage of housing wealth.
At a recent family gathering, you got into a conversation about financial matters with your 58-year-old nephew, who proceeded to “pick your brain” about retirement planning strategies he and his wife have been contemplating. Knowing that, years ago, you and his aunt had taken out a reverse mortgage, your nephew wanted to learn more about your experience. While he may be too young to qualify, you’re enjoying the fact that as a highly successful entrepreneur who is far, far wealthier than you have ever been (and owns a home valued at multiples more than yours); appears to value the advice of his eighty-three-year-old uncle….
What you shared with him is that, for you, freeing up the equity in your home allowed you to finance the rather extensive repair/remodeling that enabled the two of you to “age in place”; you were able to accomplish that goal without interrupting or reducing the cash flow from your portfolio. Your nephew, in contrast, is not contemplating retirement any time soon, but is wanting to have access to financial resources for business purposes. He wants to increase his exposure to what he describes as a “historically exciting business investment climate”.
Not all reverse mortgage candidates “need” financial help; as is true of your nephew, financial secure borrowers are looking for liquidity and flexibility. Your nephew might qualify for a proprietary or “jumbo” reverse mortgages (which are private loans not insured by the Federal Housing Administration), which allow for homeowners over age 55 to access their home equity. What’s more, while the current limit on reverse mortgages is just over $1.2 million, jumbo loans for qualifying borrowers can be as high as $4 million.
Your nephew will need to speak with a reverse mortgage professional, but you can share with him that, just as has been true on your own reverse mortgage loan, jumbo reverse mortgages are non-recourse, meaning that borrowers will never owe more on the loan than the appraised value of the home. What’s more, unlike the case with your loan, where you needed to pay mortgage insurance premiums both at closing and as an ongoing annual cost, jumbo reverse mortgage borrowers do not pay insurance premiums.
“Take it from your eighty-three-year-old uncle”, you can say – “as a high net worth, not-yet-retired, homeowner, you nephew might wish to explore the many uses for jumbo reverse mortgage funding…”
David Garrison, NMLS ID 1595194. Mutual of Omaha Mortgage, Inc. dba Mutual of Omaha Reverse Mortgage, NMLS ID 1025894. 3131 Camino Del Rio N 1100, San Diego, CA 92108. Indiana-DFI Mortgage Lending License 43321. Michigan 1st Mortgage Broker/Lender/Servicer Registrant FR0022702. These materials are not from HUD or FHA and the document was not approved by HUD, FHA or any Government Agency. Subject to credit approval. For licensing information, go to: www.nmlsconsumeraccess.org
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