Reverse Mortgages
Help Clients &
Increase Referrals
Alain Valles, President Certified Senior Advisor, CRMP, MBA
Direct Finance Corp. [email protected]
781-878-5626
My goal today is to:
1. Highlight the financial challenges facing
seniors
2. Summarize the basics of a reverse
mortgage
3. Discuss how understanding reverse
mortgages will make you a better CSA and
grow your practice
•
President of Direct Finance Corp.•
Certified Senior Advisor•
Over 20 years of mortgage experience•
First person in New England designatedby the National Reverse Mortgage Lenders Association (NRMLA) as a Certified Reverse Mortgage Professional (CRMP)
•
#1 MA mortgage broker providing reverse mortgages for past 3yrsThe Senior Housing Market
20 Million people 65 years old or older
77% Own a Home (15.4 million)
84% Have No Mortgage (12.9 million)
85% Desire to Stay in Their Home (13.1 million)
Source: National Council on Aging
The Reverse Mortgage Market
“A reverse mortgage, also known as a Home Equity
Conversion Mortgage HECM, is a federally insured home
loan administered by HUD that allows seniors to access the
equity in their homes.”
About 70,000 loans will be given this year
About 1% of total mortgage volume
About 1~2% of eligible seniors have a reverse mortgage
WHAT ARE THE TOP
CHALLENGES
FACING SENIORS?
What are the current challenges?
•
#1 Goal – Remain Independent / Afford Home
•
Increase monthly cash flow
– Pay off existing mortgage, debts, credit cards
•
Deferred home maintenance
•
Be able to pay real estate taxes
•
Health or Insurance Needs
•
Having the best quality of life possible
–
THIS IS WHERE YOU COME IN!
Your Product or Service
How will seniors “afford” life?
Where will the money come from?
Retirement Cash Flow
Common Sources & Limitations
1. Social Security
Insufficient to cover monthly expenses
2. Pensions/Investments
But wait…
There’s hope
Reverse Mortgages
May Be A Solution
.Reverse Mortgage Basics
• The Key Benefits
• How to qualify
• How much cash is available
• How is the cash received
• When is it paid back
• What is the cost
What are the key benefits?
•
#1 Benefit – No Monthly Payments Required
• No income or asset requirements
• No minimum credit score
• May close in a trust or life estate
• No restrictions on use of proceeds
• No health requirements
•
Loan is non-recourse: You can never owe more
than the value of the property. No personal
guaranty.
How does your client qualify?
What I say when I receive a referral
The Three Qualifying Questions
How does your client qualify?
The Three Qualifying Questions:
1. How old are you? Must be at least 62
2. What is the estimated home value?
3. What is the current mortgage balance?
THAT’S BASICALLY IT to PREQUALIFY!
Maximum Loan Amount Examples
+/-Age
Home Value
65
75
85___
$250,000
$148,000
$162,000
$177,000
Maximum Loan Amount Examples
+/-Age
Home Value
65
75
85___
$250,000
$148,000
$162,000
$177,000
$400,000
$240,000
$263,000
$285,000
$500,000
$302,000
$330,000
$359,000
$625,500
$381,000
$416,000
$451,000
NOTE – THIS DOES NOT MEAN THEY
SHOULD BORROW IT ALL!!!
How is the cash received?
Three Basic Options
• Lump sum
• Monthly Payments – like an annuity
• Line of Credit – most complicated part to explain
to a senior BUT perhaps the best benefit of a
reverse!!!
Reverse Line of Credit (LOC)
AMOUNT AVAILALBE
Year
Bank LOC
Reverse LOC
O
$200,000
$200,000
1
$200,000
$209,000
2
$200,000
$218,405
3
$200,000
$228,233
Why Does Line of Credit Grow?
1) Person is older
2) Assumes home appreciates in value
3) Grows at “cost of money” which is around
4.5% today.
Important Features
1) If interest rates increase so does the LOC
2) Grows independent of actual home value
3) Guaranteed by HUD
Reverse Line of Credit (LOC)
INCREDIBLE “SECURITY BLANKET”!!!
AMOUNT AVAILALBE
Year
Bank LOC
Reverse LOC
O
$200,000
$200,000
1
$200,000
$209,000
2
$200,000
$218,405
3
$200,000
$228,233
:
:
:
10
$200,000
$313,398
When does the loan become due?
• Property is sold
• Borrower passes away
(have up to 1 year to pay off loan)
• Borrower no longer occupies the home for over 12
months
Is a Reverse Mortgage
Expensive?
Compared to what?
MOVING
Is a Reverse Mortgage Expensive?
Compared to what? MOVING
• Example: Cost of selling a $400,000 home
Realtor @ 5% $20,000
Home Repairs $10,000
Moving Expense $ 5,000
Total $35,000
+/-Moving & downsizing also have high emotional costs
Compared to what?
• Moving
$35,000+/-• Reverse Mortgage Expense for a $400,000 home
HUD “MIP”@ 2% $ 8,000
Points (sliding scale) $ 6,000
Closing Costs $ 3,500
Total $17,500
+/-(Note – Cost is built into the loan)
Moving is MORE expensive than a Reverse
Is a Reverse Mortgage Expensive?
“What is Plan B?”
“Who are your “trusted advisors”?
(this is where you should be involved)
“What is our next step?”
CRITICAL CLIENT QUESTIONS
Have your “radar” on
DO NOT try to explain the details of a
reverse mortgage to your clients!!!
Build a trusting relationship with a professional,
competent, and caring
The MOST important part…
How Will a Reverse Mortgage
Help Your Clients
While Growing Your Business?
Reverse Mortgages Wheel of Opportunities
#1 Afford to Stay in Hom e Social Security deferral Pay off m ortgage Pay off credit cards Additional cash flow Hom e im provem ent Handicap acces sibility Estate & financial planning Investm ents Life ins urance Long term care insurance Res erve funds Prevent foreclosure/bankruptcy Prepay Funeral Expenses Medicine / m edical Ass ist children/grandchildren Educational expenses Realtors/1st tim e buyers Reverse for Purchase/Downsize Second hom es Travel / Tim e Share New car / RV's Pets Charities / Gifting Religious affiliations Beat theCom petition Let your database know It's a good life.
For More Information
Alain Valles, CSA, CRMP NMLS Lic. #7946
Direct Finance Corp. 40 Accord Park Dr., Ste 208
Norwell, MA 02061
781-878-5626 x224 Cell 781-724-6221 www.dfcmortgage.com
And Oh By The Way… I’m never too busy for any of your referrals!
