Trusted Advisors

We Work With Trusted Advisors

A Note To Trusted Advisors

Did you know that both government-insured Home Equity Conversion Mortgages (HECMs) and private jumbo reverse mortgages can be valuable tools for high-net-worth clients to prevent portfolio depletion? However, it’s crucial to evaluate each client’s specific situation.

We can provide detailed loan scenarios tailored to your client (with their permission) to facilitate informed decisions that benefit everyone involved. We offer complete transparency, outlining both the advantages and potential drawbacks of reverse mortgages.

Benefits for Senior Borrowers:

• Social Security and Medicare Protection: Generally, proceeds from a reverse mortgage don’t impact Social Security or Medicare benefits.** However, consulting with a qualified professional is always recommended.
• Enhanced Cash Flow: Seniors can access a portion of their home equity without the burden of monthly mortgage payments. They are still responsible for ongoing property obligations like homeowner’s insurance and property taxes.
• Financing a New Home: A reverse mortgage could potentially help seniors purchase a new home without a traditional monthly mortgage payment.
• Improved Living Standards: This loan can elevate a senior’s standard of living or provide financial security during their retirement years.
• Debt Consolidation: A reverse mortgage can be used to pay off existing mortgages, freeing up monthly cash flow previously dedicated to those payments.
• Preserving Independence: Seniors can maintain independence by staying in their own homes with a reverse mortgage. However, they must reside in the property as their primary residence, keep current with homeowner’s insurance and property taxes, and maintain the home according to HUD guidelines.
• Funding for Healthcare: Reverse mortgages can provide access to funds for in-home healthcare or medical expenses.

Potential Drawbacks:

• Foreclosure Risk: Failure to meet ongoing loan obligations such as property taxes, homeowner’s insurance, or maintenance requirements could lead to foreclosure.
• Reduced Inheritance: Equity used through a reverse mortgage reduces the amount potentially passed on to heirs.
• Declining Equity: The loan balance increases over time, decreasing the remaining equity in the property.
• Impact on Needs-Based Programs: Reverse mortgages may affect eligibility for certain needs-based programs like Medicaid.
• Tax Implications: For those itemizing deductions, a reverse mortgage might eliminate the deduction for home interest if no interest is paid out of pocket. However, if the homeowner prepays fees and accruing interest, the deduction may still be available.
• Upfront Costs: Closing costs and mortgage insurance apply, so borrowers should plan to stay in the home for an extended period.

Who Can Benefit?

• Seniors with significant home equity and limited or fixed income.
• Those seeking to maintain or improve their lifestyle.
• Clients who prefer accessing funds through a reverse mortgage instead of potentially taxable accounts.
• Seniors who want to age in place while remaining in their homes.

Important Considerations:

• Consult with a financial advisor to ensure a reverse mortgage aligns with your client’s overall financial plan.

Remember: Homeowners can generally retain ownership by fulfilling loan terms, including property taxes, homeowner’s insurance, and maintenance. However, a qualified professional should always be consulted to assess potential impacts on needs-based government benefits.

By understanding these details, you can effectively advise your clients on whether a reverse mortgage is a suitable strategy for their financial goals.