A “Standby” Reverse Mortgage A Tool for Financial Planners

A “Standby” Reverse Mortgage

A Tool for Financial Planners

Here is an example of using a reverse mortgage line of credit as an investment vehicle.  Calling it, “A Standby Reverse Mortgage”, let’s say a customer receives a Line of Credit from his reverse mortgage for $250,000: Using a Saver with minimal closing costs or Standard (with regular closing costs) Reverse Mortgage. 

Let’s assume the customer is comfortable in taking the $250,000 of cash held in reserves in his line of credit.  It’s cost  has been approximately $8,600 to obtain the line of credit.  And lets estimate the cost on any outstanding balances to maintain this line is 3.212% plus the 1.25% MIP imposed by FHA for a total cost of 4.462%.  Again, only on outstanding balances if any.

Now, having this $250,000 line increasing each year so that on the second year it will grow by $11,415 to $262.054.  The third year it increases by $11,935 to $273,989.  The fourth year it increase by $12,479 to $286,468.  And, the fifth year it increase by $13,046 to $299,514 etc.

Since the Reverse Mortgage carries no other costs other than the MIP and interest for the amount outstanding, and there are no monthly payments due to the bank, it becomes a fantastic tool for Financial Planners to use for their clients who have large price tag homes with a lot of equity and desire the opportunity to earn a larger amount on their money than normally paid by a Bank on a Certificate of Deposit or many other investment vehicles.

By using the “Standard” Reverse Mortgages, the closing costs will be greater by about $9,750, but the customer will see a credit line amount of $289,888, vs the $250,639 of the Saver Reverse Mortgage.  A specific side by side comparison of both programs should be reviewed by the Financial Planner and the Customer before making a final decision as to which program to follow.

For a complete comparison packet of information on this unique FHA Reverse Mortgage program, please contact George Lagarde, NMLS 18581 at 702-845-4632 for a confidential appointment.   

George Lagarde

ReverseMortgageLV.com

GLagarde@AllWestern.com