Here Comes the Boom
There may be some disagreement over what birth years constitute the Baby Boomers Generation, but one thing is certain: we’re ALL getting older, so in the end, it’s sort of a moot point. For the sake of this article, though, we’re going to say that the Baby Boomers are the generation that was born between 1946 and 1964. Let me do the math for those of you who are numerically challenged or just tired: we’re talking about folks who are roughly between the ages of 55 and 73. Many who are in this age range might be looking to purchase their last home or a vacation home, so I’m going to teach you a little trick that could very well get you A LOT of clients: Reverse Mortgage PURCHASE.
Probably six months or so back, I wrote about Reverse Mortgage Purchases, and some of you MAY have been paying attention. For those who remember that, this will be a quick refresher. For those who are new to this concept, this will be a crash course, and you’ll come out the other end smarter and ready to meet a growing demand because Baby Boomers are only getting older and more and more, each day, are entering the ranks of eligibility for a Reverse Mortgage Purchase: the age of 62.
If they’re planning on selling their existing home to purchase a new primary residence, it’s possible that they’ve been living in their existing home for quite a while and either have it paid off or have a lot of equity built up. In broad strokes, a Reverse Mortgage Purchase requires roughly half the sell price of the house your client is purchasing. Example: the list price of the house is $300,000; using a Reverse Mortgage Purchase, the buyer could pick up the home for about $150,000 in cash (that includes down payment and fees) and never have another payment on that home for as long as they continue to live in that home. Here’s where you become their new best friend.
Let’s say they’ll net $300,000 for their home. When they come to you for help in finding a new place, you can give them some very attractive options: they can buy a $300,000 home with $150,000 using a Reverse Mortgage Purchase (and then they can use the other $150,000 to vacation, invest, or purchase a really nice gift for their newly adopted real estate agent), or they can buy a MUCH more expensive and larger home with up to $300,000 they have in cash using a Reverse Mortgage Purchase. In either case, they won’t have another monthly mortgage payment for as long as they live in the home. And when they pass, their family/heirs have no financial obligation.
On the flipside, let’s say they want to keep their existing home and buy a small vacation home. Depending on the equity they have in their existing home, it may be possible to take enough cash out through a standard Reverse Mortgage to pay cash for the vacation home. Since, of course, the vacation home is paid for in cash, there’s no monthly mortgage; conversely, because the homeowner was able to pull cash out of their existing home through a Reverse Mortgage, there’s no monthly mortgage payment either on the existing home. Two homes with no mortgage payment! The existing home will leave no financial obligation for the family/heirs, and the vacation home, since it’s paid for free and clear, leaves only the task to decide who the homeowner loved the most by leaving it to that cherished person.
In any instance involving a Reverse Mortgage (re-finance or purchase), while the homeowner will no longer have a monthly mortgage to worry about, they’ll still be responsible for paying adequate homeowners’ insurance and the applicable property taxes on a timely basis.
This obviously doesn’t work if your clients have plans on leaving their existing home for a child or heir – we’re not looking to complicate matters. However, if they come to you without such notions, you’re going to impress their socks off when you tell them about these options. And unlike other generations who prefer to post emojis on social media than actually talk to other human beings, the Baby Boomers have developed the art of communication and will tell everyone they know about how smart you are – some will sing such high praises about you, many will think you’re one of their grandchildren.