What brokers should know before adding reverse mortgages to their suite
“One common one is that reverse mortgages are only for needs-based borrowers,” he said. “That is not the case at all. It can be part of a strategic retirement financial plan and can be easily utilized that way.”
Irwin said another misconception is that borrowers must own their home free and clear to qualify. The reverse mortgage does need to be in a first lien position, he said, but borrowers can and do use reverse mortgages to pay off existing first mortgages as part of the transaction.
The third misconception, according to Irwin, is that the product is only for homeowners who want to stay in their current home, when reverse mortgage products can be used to purchase a new home.
He said a fourth misconception matters most from a client conversation standpoint. Because reverse mortgages are negatively amortizing, the balance can grow over time.
“Brokers need to understand that reverse mortgages are non-recourse loans,” he said. “If at some point the balance owed exceeds the home value at time of payoff, it’s only the value of that property that’s going to pay off the loan. The heirs of the estate are not going to owe any additional money other than the value of that property at the time of death.”
