How a Reverse Mortgage can Help You Sell More Homes and Double the Size of the Sale
Say your client is a 69 year old woman that wants to sell her home because it has too many stairs, and she cannot maintain the yard any longer. It is listed for $199,000 and has a $30,000 HELOC outstanding.
You end up selling it for $195,000. After about $13,000 in closing costs and paying off the $30,000 HELOC, she only nets out $152,000. She does not want a new mortgage payment.
You could find her a small condo or townhome for $150,000, but it would not be nearly as nice as she wants.
She sees an ad for the cutest little patio home that is just perfect for her at $275,000. Unfortunately, her only verifiable income is Social Security and a small pension totaling just $1,650 per month and she is really not comfortable taking on a new $585 mortgage payment for the next 30 years (the rest of her life).
This is what it would look like if she purchased the home with traditional financing:
| Cash out from sale of old home | $152,000 |
| Purchase price of new home | $275,000 |
| New Mortgage | $123,000 (P&I only =$585 at 4.0% interest) |
| Money left in her pocket | $0.00 |
However, with a reverse mortgage, she could qualify for $146,000 after all loan costs on the patio home. This means she would only have to bring $129,000 to the closing and not have to worry about making any mortgage payments, plus she keeps over $23,000 in her bank account from the sale of her old home!
This is what a Reverse Mortgage for Purchase would look like:
| Net cash out from her old home | $152,000 |
| Purchase price of new home | $275,000 |
| New reverse mortgage loan | -$146,000 |
| Cash required for down payment | $129,000 |
| Money left in her pocket | $23,000 ($152,000 – $129,000) |
This is a win, win, deal. You win because you were the one that introduced her to the idea of using a reverse mortgage, plus you were able to sell a larger, more expensive home. The client definitely wins because she gets to own and live in the house of her dreams for the rest of her life, enhancing her retirement years!
Please note that the numbers above are based on interest rates and loan programs effective as of January of 2016. The programs and interest rates can change affecting these numbers. This is for illustration purposes only.
Please contact me for more information or with any questions about our reverse mortgage for purchase program.
I teach a 2 hour C/E class through Williams Title every other month and am also available to come to your office and teach the class for groups of five or more.
