<< Doors continued from Page 128 “More than 10,000 Americans per day
are turning 62, making them eligible
for this loan.”
program allows seniors to purchase a new home using
proceeds from the loan.
Why it’s attractive
The HECM offers a number of ways to access the loan
proceeds, including tenure payments, term payments,
a line of credit, cash or any combination of these. In
addition to a HECM, some lenders also offer proprietary
jumbo reverse-mortgage products, which can offer
more flexibility than the traditional FHA-insured HECM.
These jumbo products are a good fit for higher-valued properties, with loan amounts up to $4 million. There is no mortgage insurance premium and no
initial disbursement limitation. Borrowers take the full
amount of available funds at closing. There are some
limitations on approved properties and this product is
not available in all states, but it’s worth looking into if
you generally deal with higher-valued homes.
For many boomers, the HECM can be viewed as a
key component within a comprehensive retirement
plan, alongside 401(k)s, IRAs, Social Security and other
income and asset resources. Having access to home
equity gives borrowers an alternative funding source
should their investments underperform. It also pro-
vides a funding source for insurance plans, including
long-term care policies, without impacting household
cash flow. In cases where the cost of insurance is too
high, or borrowers don’t medically qualify for it, they
can “self-fund” their long-term care risk with the HECM
The HECM line of credit is the most flexible option
to incorporate home equity for these and other retirement planning needs. The line of credit is guaranteed
to grow and compound at a rate equal to the cost of
funds, cannot be called regardless of what happens
to the value of the home and has no term expiration
or payments required. Once it is put in place, it grows
and compounds for as long as the borrower lives in the
property. When planning a 20- to 30-year or longer
retirement, these assurances help to manage any risks
to the long-term retirement-funding plan.
What it means for you
Let’s explore a few ways a HECM can help grow your
business as a mortgage originator. More than 10,000
Americans per day are turning 62, making them eligible for this loan. All of them are trying to figure out
how to effectively fund their lifestyles for the next 30
years or more. Opportunity exists to approach past
clients about refinancing an existing mortgage into a
HECM or moving to a new property by using a HECM
for Purchase loan.
Instead of relying solely on millennial borrowers to
finally pull the trigger on a home purchase, you also
can establish new relationships with seniors who may
benefit from a HECM by using it as an opportunity to
create a new revenue stream. Real estate agents need
a competitive edge with clients as much as you do. By
teaming up to offer something different that enables a
senior buyer to be competitive in the housing market,
you’re adding value to your relationship.
Similarly, financial advisers, tax attorneys, certified
public accountants and other professionals also need
to continue to add value to their client relationships.
Ensuring they are aware of how home equity can be
used in retirement planning can help grow their business and yours.
While the HECM may not be the best option for everyone, educating yourself on the benefits of the product
and how it can help today’s seniors live a more comfortable retirement can only benefit your mortgage
origination business. ■