Reverse Mortgage as Bridge Loan

House1In light of the current downturn in the real estate market, it has become apparent that reverse mortgages are being used more and more as bridge loans for seniors. It is an interesting concept, and one that will likely continue to grow. Since houses are taking longer and longer to sell, from 6 months to a year in different areas around the country, it may make sense for a senior homeowner to wait until the market comes back, then sell at a more reasonable sales price.

The likely scenario would be that there is a need for immediate cash and an unwillingness to sell at a low price. The loan, likely to be a proprietary reverse mortgage (though still non-recourse), would make most sense as the closing costs are much less for proprietary products. Though one could make an argument to do a HECM (FHA) if sale prices are super low. Rates on a propreitary reverse mortgage range from mid- 7% to mid-8%. For a bridge loan (short term), that is not bad.

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