1. Using a Reverse 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 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. Doing Your Reverse Loan Through a New or Inexperienced Loan Officer.
It may be hard to believe, but bank loan officers don’t have to be licensed or trained to the States standards. On the other hand, mortgage brokers have very strict criteria set by the State to be allowed to do loans for the public. Virtually anyone can be a loan officer at a bank and experience is not necessarily a requirement. You could walk into a bank, apply for the job, and be taking applications in a very short period of time. It may be a bit biased, but I would prefer to deal with someone that is a trained professional, one that is licensed and can be held accountable to the State. Since the commission that a loan officer earns can be pretty high, it can tempt the younger, less experienced ones to overcharge in the hopes of making a big payday.
4. Not Doing a Reverse Loan For Fear of Them.
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. Being Pushed into a Reverse Loan.
While it is true that I could tell you everything you need to know about a reverse Mortgage Loan 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. Waiting Until You are Older So You Can Get More Money.
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.
See more articles and blogs at Redwood Reverse Mortgage. David Prulhiere owns Redwood Financial Services and specializes in reverse mortgage education and loans.
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