5 Huge Mistakes Commonly Made With Reverse Mortgage
5 Huge Mistakes Commonly Made With Reverse Mortgage
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. A Reverse Mortgage Can Affect Your Government Benefits.
The most common benefit we are talking about is Medicaid. There is a restriction on how much cash and assets you can have when being on this program. This can happen when a senior takes a reverse mortgage and gets a lump sum of money to do some repairs around the house. They get $20,000 to do a new roof and some much needed deferred maintenance, and put it in their bank account. While the repairs are being done, the money sits there and when the new month comes around, Medicaid disqualifies you for "having too much money". Another example is; if you are short on money each month, say $200.00, and you opt to get a monthly income of $400.00. If you make the mistake of saving the extra money, you could, after several months, disqualify yourself when your savings gets "too large".
3. Doing Your Reverse Mortgage Loan Through a New or Inexperienced Loan Officer.
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 Mortgage Loan Because of Fear of the Unknown.
Not knowing who to trust can be a cause of fear when searching for a reverse mortgage. You should never use someone you don't feel you can trust completely. You are not required to use anyone just because you met with them for a short period of time. Make sure when you get your advice, that you get it from a source that knows what they are talking about. There is an article titled "Bad Advice From Good People about Reverse Mortgages" you should read. It will help you identify who to listen to. Basically, it talks about making sure the person giving the advice knows what they are talking about. A wall full of degrees doesn't mean they know the details of the lending business. In other words your doctor is probably a very educated man, but would you go to him if you wanted stock advice? Another thing is; don't disqualify yourself because you think you know the rules. It doesn't hurt to talk to a mortgage professional and get their opinion.
5. Moving Too Quickly During the Reverse Mortgage Loan Process.
It only takes about 10 minutes to teach you everything you need to know on a reverse 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. Try to Get More Money by Waiting Until You are Older
Bonus mistake: I know I said five, but this one came up while typing this. Waiting until you're older is not always the best option. With rates being so low and terms being so good, it probably makes more sense to do the loan now rather than later. This is because adding another year or two to your age will get you a little more money. But, if the interest rates go up just a half of a percent, it could make thousands of dollars difference. The point is; Lower rates trump age, assuming all potential borrowers are at least 62 years old.
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