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Baltimore Reverse Mortgage Pros and Cons

The HECM (Home Equity Conversion Mortgage), more commonly known as a reverse mortgage, is designed to help older Americans age in place and enjoy retirement.

Since its inception, the reverse mortgage program has been widely misunderstood, sometimes misrepresented and often overlooked by financial planners and consumers alike. 

It’s important to get the facts before making a decision for yourself or your family. This article will examine the pros and cons of reverse mortgages, dispel common misconceptions and discuss the ways reverse mortgage loans can help solve America’s longevity funding dilemma.

How Does A Reverse Mortgage Work

If you’re like many older Americans, you’ve worked hard and saved money, but you may still have concerns about having enough to live comfortably throughout your entire retirement. If you’re retired, or close to retirement, the wealth amassed in your home equity likely represents a large portion of your net worth. 

Understanding how to strategically and tax efficiently incorporate this wealth into your retirement plan may be the key to prolonging and protecting your overall portfolio. How we plan to fund our longevity is very different today than in decades past. Historically, many companies provided lifetime pensions, which provided retirees with certainty and peace of mind. Today, medical expenses, longer life-spans, long-term care needs and other issues have left many older Americans in Baltimore worried about the possibility of outliving their money. 

Yet, older homeowners have amassed an unprecedented $7.14 trillion in untapped home equity as of the first quarter of 2019. (Source: National Reverse Mortgage Lenders Association and Risk Span) This begs the question: Is it reasonable to ignore your largest asset when developing a financial plan?

Simply put, a reverse mortgage loan enables homeowners age 62 or above the ability to borrow up to roughly 50 percent of their home’s value. Payouts can be made to the borrower in the form of a lump sum payment, line of credit with a guaranteed growth rate, monthly payouts or a combination of all three. (We’ll touch on how the line of credit grows in a future article.) 

A reverse mortgage may also be used to purchase a home. The HECM for purchase loan combines a reverse mortgage with the equity from the sale of your previous home – or from other savings and assets – to buy your next primary home in a single transaction. Regardless of how long you live in the home or what happens to your home’s value, you only make one initial down payment towards the purchase, provided that you pay property taxes and homeowner’s insurance, and maintain the property.

Reverse Mortgage Misconceptions

A common misconception about reverse mortgages is that bank owns the home. This is not the case. The homeowners retain ownership of the home, just like they would with a traditional mortgage. Unlike traditional mortgages, there is no monthly payment requirement as long as the home remains the primary residence. 

Another common misconception is that rates on reverse mortgages are higher than traditional home loans. This is also false. Reverse mortgage interest rates are in line with traditional mortgage rates. Borrowers have the option to make monthly payments or to defer payback until the last remaining borrower leaves the home. 

The key here is flexibility. Reverse mortgage borrowers may access their home equity on demand. The flexible payment option is designed to provide homeowners, especially those on a fixed income with additional cash flow later in life when a mortgage payment can often be burdensome.  They may also pay back the loan without penalty, or sell the home at any time. Borrowers must pay their property taxes, insurance and maintain the home to comply with loan guidelines.

Reverse Mortgage Pros

  1. Tax-free access to untapped housing wealth with no monthly mortgage payment.
  2. Using the equity in the home may supplement your retirement income, allowing you to pull less from your other retirement accounts, minimizing your withdraw rate from those accounts.
  3. A reverse mortgage loan is a non-recourse loan. This means that neither you nor your heirs are personally liable for any amount of the mortgage that exceeds the value of your home when the loan is repaid.
  4. After the loan is repaid, any remaining equity belongs to you or your heirs.
  5. Proceeds may be used for virtually anything.

Reverse Mortgage Cons

  1. If no payments are made, the loan balance increases over time. 
  2. It may impact eligibility for needs-based programs such as Medicaid. (Note: regular Social Security and Medicare are not affected.)
  3. No additional licensing is required. Many who are licensed to originate traditional mortgages will also originate reverse mortgages as an additional income source. While this is allowed, it is in your best interest to work with someone who specializes in reverse mortgages and understands the strategy for implementing housing wealth in retirement planning.
  4. While there are fixed-rate options, the majority of reverse mortgages require an adjustable rate. There are rate caps of 2 percent per year and 5 percent over the life of the loan, but the adjustable rate may cause the loan balance to rise more rapidly over time. 
  5. If you end up moving into a long-term care facility, you’ll have to repay the loan in order to keep the property.

​The Bottom Line

As with any product or service, education is paramount. The reality is that the home is too large an asset to be ignored. Today’s reverse mortgages are not meant to be a Band-Aid or short-term fix to larger financial issues. In some cases, someone in financial distress may be better off selling the home to access more of equity, downsizing or moving to a care facility. 

In other cases, a reverse mortgage is a powerful tool that can provide a more stable, comfortable and fulfilling retirement. If you’re considering a reverse mortgage, reach out to a specialist who has expertise in this specific program and who will take the time to understand your unique needs and situation.

Steven J. Sless (NMLS: # 298581 MLO: # 49963) is the reverse mortgage division manager with PRMI. He also oversees PRMI’s office in Owings Mills – one of the nation’s only consumer-direct retail branches that deals exclusively with reverse mortgages. For more information, Contact Us, call 410-814-7575 or follow morewithsless on Facebook, Twitter, LinkedIn and Instagram.

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Joseph Susserman

With 10+ years of experience, Joe Susserman is a top-level producer with a proven track record of success in the reverse mortgage space.

At The Steven J. Sless Group of PRMI, Joe educates homeowners to determine if a reverse mortgage will meet their financial goals. He then helps clients to navigate through all steps of the loan process.

“I enjoy assisting seniors to help them live a better retirement,” said Susserman, who has three sons and two grandchildren. Joe says, “I aim to provide the highest level of customer service and be responsive to all of my clients’ needs.”

JOSEPH SUSSERMAN: NMLS 986529. Maryland Department of Labor, Licensing & Regulation Commissioner of Financial Regulation #5511.

Steven J. Sless, CLTC®

Steven J. Sless has become regarded as the “go-to housing wealth source” by various media outlets. Bringing nearly 20 years of mortgage industry experience, he founded The Steven J. Sless Group of PRMI, the lender’s national division dealing exclusively with reverse mortgages.

A powerful speaker and communicator, Steven regularly gives seminars and learning workshops for homeowners 60+, their family and trusted advisors. Exploring the nuts and bolts of reverse mortgages, Steven presents the facts, dispels common myths and misperceptions, and answers questions so his audiences can make informed decisions and take control of their retirement.

In 2019, Steven earned the CLTC®: Certified Long-Term Care professional designation, demonstrating that he also has acquired the critical tools necessary to discuss the subject of longevity and its acute consequences on a client’s family – financially, physically and emotionally – years down the road.

“Possessing knowledge of long-term care and what decisions must be made before care is needed will allow me to better serve the needs of my clients,” Steven says. “Having a deeper understanding of my clients’ needs will allow me to have a more advanced conversation with them, their family and trusted advisors.”

In addition to helping clients and educating colleagues and audiences, Steven loves spending time with his wife and two young daughters. He also is an avid fan of the Baltimore Ravens and Orioles, and he enjoys playing golf and cooking.

Steven J. Sless NMLS# 298581 . Licensed by the Delaware State Bank Commissioner to engage in business in Delaware 5644 expires on 12/31/2021. Georgia Residential Mortgage Licensee. Georgia Department of Banking and Finance 6521. Indiana-Department of Financial Institutions Consumer Credit Division, First Lien License 11069 Secretary of State Securities Commission Second Lien License 103936. C.P.D. Reg. No.-19-07981

Brandy Nickoles

Brandy Nickoles has over 17 years of experience in the mortgage industry, dedicating the last 8 years solely to reverse mortgages. With great knowledge of the reverse mortgage product, she is committed to making sure our borrowers have a seamless experience.

Instrumental in creating infrastructure from file setup through loan funding, Brandy manages the loan pipeline. This includes everything from analyzing documentation and loan scenarios, to creating and implementing process/procedures, and coordinating with lenders.

Brandy also trains and oversees team members to ensure tasks are completed timely and efficiently. Having worked with Brandy for nearly a decade, Steven and Andrew can attest that her attention to detail and organization is top notch.

Covid-19

The Steven. J. Sless Group is fully operational and committed to expediting loans for our clients during these unprecedented times.

We have implemented the following measures to ensure the safety of our team members, strategic partners and valued customers:

  • Virtual meetings
  • Electronic applications and signatures
  • Contactless home appraisals
  • In-person meetings with social distancing and other necessary precautions

 

Call us at 410-814-7575 or schedule an appointment. (link )

Andrew S. Parker

Andrew Parker began his career in the mortgage industry in 1999 and transitioned to focusing solely on reverse mortgages in 2008. Through the years, Andrew has built a stellar reputation in scaling mortgage teams and overseeing products and systems training.

He has worked in tandem with Steven for the past 18 years and now oversees day-to-day production operations at the Steven J. Sless Group. In addition to managing loan originators and coordinators, providing product training and helping them to structure loan scenarios, Andrew works with credit desks to get clients approved.  He also navigates underwriting approvals.

Andrew is a big reason why The Steven J. Sless Group get clients approved for loans that other lenders don’t, and why the team closes loans much quicker than the industry average.  He has consistently forged strong bonds with and earned the trust of clients and strategic partners.

Robert Sklar

With 10+ years of mortgage industry experience, Robert Sklar educates clients about reverse mortgage loans and the strategy of incorporating housing wealth in retirement planning.

In doing so, he structures loan scenarios based on clients’ specific goals and needs. He also reworks loans to new terms and identifies additional conditions as needed to insure a viable credit decision. And he analyzes credit reports, property appraisals, titles and associated documentation.

Passionate about making a profound impact in the lives of his clients and others, the Hofstra University graduate has become a trusted resource of information and education in and around Baltimore.

ROBERT SKLAR: NMLS 1161107. Maryland Department of Labor, Licensing and Regulation Commissioner of Financial Regulation #5511.

Sharon Birdow

Bringing 30 years mortgage industry experience, Sharon Birdow is adored by her clients and colleagues alike.

The West Chester University graduate, wife and mother of four has served as branch partner and originating loan officer, branch manager and senior mortgage loan officer. She was named Loan Originator of the Year in Volume in 2016, 2017 and 2018.

At The Steven J. Sless Group of PRMI, Sharon helps clients 60+, their families and trusted advisors to obtain reverse mortgage loans. She regularly consults with financial professionals on the benefits an HECM provides and how to utilize this tool in individual retirement planning.

“It’s my privilege to educate and empower older Americans about the versatility of reverse mortgages,” Sharon says. “I love helping our clients achieve financial independence and peace of mind in their golden years.”

SHARON BIRDOW. NMLS#176375 // GA MLO # 47859. California – Licensed by the Department of Financial Protection and Innovation (DFPI) under the California Residential Mortgage Lending Act 4130403. A copy of our Privacy Policy and Notice is accessible by going to Primary Residential Mortgage’s website and clicking on the “Privacy Policy” link located at the bottom of the page. https://www.primeres.com/privacy-policy – District of Columbia-Department of Insurance, Securities and Banking Department MLB3094. Distrito de Columbia-Florida Office of Financial Regulation MLD646. Oficina de Regulación Financiera de Florida MLD646. Georgia Residential Mortgage Licensee. Georgia Department of Banking and Finance 6521. Indiana-Department of Financial Institutions Consumer Credit Division, First Lien License 11069 Secretary of State Securities Commission Second Lien License 103936. C.P.D. Reg. No.-19-07981 Indiana-Departamento de Instituciones Financieras, División de Crédito al Consumidor, Licencia de primer grado 11069, Secretaría de Estado, Comisión de Valores, Licencia de segundo grado 103936. C.P.D. Reg. No.-19-07981

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Justin Zornman

Fifteen-year customer relations and hospitality management veteran, Justin Zornman is the group’s first remote hire.

Based out of Kalamazoo, MI, he is responsible for helping clients to navigate the loan process. He also assists loan originators and aids the processing team to expedite loan closings.

A University of New Orleans graduate, Justin is currently completing his studies to pass the mortgage originators exam, get licensed and, one day, open a Michigan branch for the group.

“I am honored to ease the way for homeowners, 60+ to secure a better retirement,” Justin says. “I look forward to ultimately establishing The Steven J. Sless Group of PRMI as the market leader in Michigan.”

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