Reverse Mortgages Ease the Borrower’s ‘Hustle’ – Advisor
According to a man who specializes in arranging reverse mortgages, a kind of “frustration factor” is driving people to reverse mortgages and eliminate tail-end mortgages.
Wednesday, October 26, 2022 at 11:07 am
Eric Frikberg
His new client is an elderly man with a low mortgage balance who suddenly gets annoyed when interest rates more than double.
“This is a trend we’ve noticed in the last few weeks,” said Maurice Melhopt, a veteran broker who is mostly dedicated to home equity release (HER) schemes such as reverse mortgages.
“People with tail-end mortgages see interest rates rise significantly and decide to get rid of it altogether.”
According to Mehlhopt, the scenario looks like this:
A middle-aged couple bought their last home for their teenage family 20 years ago for $400,000.
Twenty years later, the children are gone, the couple are retired, and only $40,000 remains in their mortgage payments. decided it wasn’t worth it.
Then, when it came time to renew the mortgage, the couple was appalled when the new offer to roll over the loan topped 6%.
“They come to me saying they want to get rid of it, so I’ll arrange a reverse mortgage to pay it off,” says Mehlhopt.
Andrew Ford manages reverse mortgages for Heartland Bank, the largest player in the market. He views his HER market a little differently than he does Mehlhopt, and Reverse attributes his mortgage growth primarily to rising costs of living.
He also denounced the Credit Contracts and Consumer Finance Act (CCCFA), saying people with tail-end mortgages may not be able to roll them over because of legal restrictions.
But he noticed that Mehlhopt’s concerns were being played in parallel in the HER field.
“The demand for refinancing is increasing,” he said.
“We are refinancing more because our retirement debt is rising, and if borrowers are getting out of very low interest rates, it could be a catalyst for borrowers to look at the overall problem.”
In other words, people are replacing real mortgages with reverse mortgages in their old age.
These and other factors are pushing the HER market up 25% each year, according to Ford.
Comments from readers
No comments yet
login To add a comment
https://www.goodreturns.co.nz/article/976520934/reverse-mortgages-ease-borrower-annoyance-adviser.html?utm_source=GR&utm_medium=rss&utm_campaign=Reverse+mortgages+ease+borrower+%E2%80%9Cannoyance%E2%80%9D+-+adviser Reverse Mortgages Ease the Borrower’s ‘Hustle’ – Advisor