1. Getting a Reverse Loan for the Purpose of a Short Term Fix.
The cost of a reverse mortgage would normally make it a mistake to use for a short term fix. While there are definitely times to use it short term, think of a reverse mortgage as something you are going to use for the next 10+ years. In the event that you are in some serious financial dire straights, like possible foreclosure or in need of repairs to make your home habitable, it may make sense to do a short term reverse Loan. Being aware of the fees associated with the loan will help you determine whether or not you are making the smart choice. Of course, a trusted loan officer will be able to guide you, but ultimately, you need to be the one making the decision.
2. A Reverse Mortgage Can Affect Your Government Benefits.
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. Not Doing a Reverse Mortgage Loan For Fear of Them.
There are so many people afraid of a reverse mortgage for no other reason than they just don’t know who to trust. The facts seem too good to be true, so they shy away. What I would like to show is how to know what is true and how to make a smart decision. First off, there are too many “experts” in a field that they know nothing about. The amount of disinformation is almost overwhelming, even for someone who knows the truth. I have seen financial planners who will state that you lose your home when you do a reverse mortgage. I have heard several people say that you will leave excessive debt to your heirs. So here is a little advice that may soothe your concerns: First, try to find a loan officer that you feel you can trust. If you have an uncomfortable feeling about the loan officer, you should probably find someone else. You are not tied to the first person you talk to. Second, don’t listen to the advice of everyone out there. There is a great article (if I say so myself) called “Bad Advice From Good People about Reverse Mortgages”. Check it out if you want to see an article about how to qualify the person giving you the advice. The gist of it is; see if the person you’re seeking advice from actually knows anything. In the example above, the financial planner may be a genius about retirement money, but probably has never originated a loan. If you ask your kids for advice, which is strongly recommended, make sure they know what they are talking about. If they are not qualified to advise, have them attend your meeting with the loan officer. This also applies to you. I have seen people disqualify themselves because they don’t think they qualify. The best advice here is to ask a true professional in the field.
5. Moving Too Quickly During the Reverse Mortgage Loan Loan Process.
It only takes about 10 minutes to teach you everything you need to know on a reverse Mortgage Loan. But you will probably have questions that will make you more comfortable when you get the answers. Sometimes these questions take a little time to formulate, so don’t let your loan officer rush you into making a decision. Don’t mistake doing your loan quickly with pushing you to make up your mind in a hurry. Once you have determined you want a reverse mortgage, the process should be fairly quick. It will take about a month to a month and a half to get your loan closed.
6. Waiting Until You are Older So You Can Get More Money.
Here is a bonus mistake. Remember your age and the value of your home combined with the interest rate determines how much money is available to you. While being a few years older can net you a few thousand dollars more, an interest rate change of 0.5% higher can make tens of thousands of dollars less available to you. So while it is true that you get more money when you are older, you have to consider that the interest rate will probably go up. Then any age benefit you were getting will be lost.
See more articles and blogs at Redwood Reverse Mortgage. David Prulhiere is the owner of Redwood Financial Services and is a specialist in reverse mortgage education and loans.
