| Don't Make These 5 Mistakes With Your Reverse Mortgage. |
| Articles - Mortgage |
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1. Using a Reverse Mortgage for a Short Term Fix.
1. Using a Reverse Mortgage Loan for a Short Term Fix. While there are definitely times where a short term fix is needed, the cost of a reverse mortgage usually makes it more beneficial if you are going to keep it for several years. If foreclosure is imminent or there are repairs that need to be made to your home that can't wait, then it makes sense short term. Knowing the actual fees associated with your new loan will help you determine if it makes sense for you. A trusted loan officer will be able to guide you, but ultimately the decision should be yours. 2. You Could Lose Government Benefits After Closing Your Reverse Loan. The benefit that is most commonly affected is Medicaid. If you are on it, you know that there is a limit to how much cash you are allowed to have to be considered for this program. What can happen is; the senior uses a reverse mortgage to get a lump sum of money to do some repairs to their home. They withdraw $20,000 and put it in the bank waiting for the work to get done. When the new month rolls around, they have exceeded the Medicaid limits, and now can be disqualified. Another way that it can happen is when using a reverse mortgage to get additional income monthly. If you needed only $200.00 a month to make ends meet, but you got $400 a month so you could have a buffer, after several months you could save up "too much" money and be disqualified. 3. Using an Inexperienced Loan Officer for Your Reverse Mortgage. Can you believe that a loan officer at a bank doesn't need to be licensed? There is no state licensing or education required on the proper way to handle loans. Just about anyone can qualify to be a loan officer in a bank. If you just walk in and say, "I would like to be a loan officer", you will probably get a desk and a name badge. Call it biased if you like, but I prefer the idea of talking to a trained professional and would like to see a license showing that they can be held responsible. Because the commission is usually pretty good, a loan officer new to the business will sometimes try to make as much money as possible on your loan. Since the terms are all pretty much the same wherever you go, you should really interview your loan officer and test their knowledge. Make sure that you are comfortable with them, as you are trusting your future finances to them. 4. Avoiding a Reverse Loan Because of Fear of the Unknown. It seems very common to find people that are afraid of a reverse mortgage just because they can't find someone that they can trust to explain it in a way they can understand. When it sounds too good to be true, they tend to shy away. Let me start by saying there are always "experts" on topics that they know nothing about. Even for someone who knows the truth, it is almost overwhelming the amount of disinformation being spread. Some financial planners will tell you that you could lose your home. Others will say you are going to leave more debt to your heirs. In an attempt to soothe your concerns, here is a little advice. First, find a loan officer you trust. If you are uncomfortable with your current loan officer, find another one. You are not obligated to anyone just because you talked to them first. Second, don't listen to everyone's advice that throws it at you. You can read the article "Bad Advice From Good People about Reverse Mortgages" and get an in depth look at who to listen to. To summarize it, you should look to get advice from the professional in the field. Your financial planner may be great with your investments, but has probably never originated a loan. It is always recommended to get advice from your loved ones, but make sure they know what they are talking about. Maybe invite them to listen in on your next meeting with your loan officer. Also, please don't disqualify yourself because you think you may not qualify. Just to reiterate, get the advice from a professional in the mortgage industry that specializes in reverse mortgages. 5. Rushing Into the Reverse Mortgage Process. While it is true that I could tell you everything you need to know about a reverse Mortgage in about 10 minutes, I recommend letting it sink in after you gather the information. The rushing I am speaking of is when a loan officer is pushing you to do the loan. You need to do the loan when you are ready and understand what you are doing. Do it at your pace. Don't let someone else dictate it. That said; I don't want you to confuse the rushing with an efficient loan process. Once you have made a decision, the loan should take roughly 30-45 days to close. Usually once you have made up your mind, everyone involved wants to get it closed. 6. Try to Get More Money by Waiting Until You are Older The title says five, but here is a bonus one that came up. It is not always the best option to wait until you are older to get more money. When interest rates are as low as they are, it is more benifical to do your loan now instead of later. While it is true when you are a couple years older you will get more money available to you, this assumes the interest rate doesn't change. On the other hand, if the rates go up, your age won't come close to making up the difference you lose. A rate change of a 0.5% can make tens of thousands of dollars difference. A few years will make only a few thousand dollars difference. DISCLAIMER: This article is provided as information only and is not to be taken as financial advice. Read more about reverse mortgages at Redwood Reverse Mortgage. David Prulhiere owns Redwood Financial Services and is a specialist in reverse mortgage education and loans. |