Tag Archives: seniors

Mortgage Finance

If I Wait To Do My Reverse Mortgage, Will I Get More Money?

We will address the three factors of a reverse mortgage that determine that amount of money that is available to you in this article.

1. Your age. You probably already know that you need to be at least 62 years old if you want to do a reverse mortgage, but does it make sense to wait until you are older to get more money? In my opinion, it does not pay to wait to get older. Interest rates may go up, and that will affect your available equity more than your age, but more on that in a minute.

The prior paragraph has an exception. If there is a spouse under 62 years old, but you qualify, should you wait until everyone is old enough? I can definitely say “it depends”. If there is a hardship like potentially losing your home or needing a sum of money for medical expenses, it can make sense to just do the loan. Another reason to not wait is if the spouse is planning to move upon your passing so they can live near family. By taking a person off title and doing a reverse mortgage, you run the risk of leaving them without a home. They will need to refinance or sell the home since they weren’t on the reverse mortgage. Please remember: It doesn’t usually make sense to remove a person from title just to get more money, unless there is a hardship being avoided.

2. The interest rates. Interest rates are at an all time low. Fixed rates are in the low 5’s. An interest rate hike of a percent or more could mean thousands of dollars less that you receive. Do you want to gamble with what the rates will be in 3 or 4 years?

3. What your home is worth. The value of your home is what your loan amount is based on. So if you are hoping that values will go up enough to matter, you might be better off using today’s value. Guessing what the home will be worth 3 years down the road is pretty hard to do. I have plenty of clients that wanted to wait a couple of years and all that happened is the values of their properties have decreased. If you’re lucky you may still qualify.

If it works, why continue waiting? What are you hoping for? If the numbers work today, just do it. You can use a reverse mortgage to start living your retirement today, with real numbers that you can use, based on today’s information. If you would like to see what you qualify for, try our FREE reverse mortgage calculator.

Mortgage Finance

Four Important Reverse Mortgage Disadvantages

1. You don’t get to write-off your mortgage interest:

a. Remember the 1099 form you get that shows how much interest you paid? You won’t be getting that after you complete a reverse mortgage. Since you have accrued interest and not paid interest, there is nothing to write off. Once you pay the interest, you will get the write off, but normally that occurs when the home is paid off.

b. Is the write-off more important to you than the lack of house payments? Many would prefer the no house payments or the opportunity for increased income to getting the interest write-off.

2. Accruing interest or your balance growing:

a. You will accrue interest on a reverse mortgage. This means that your balance will grow as the months progress. Since you are not making payments, the interest that is being charged to you has to go somewhere. The lender puts it on the balance you owe them, so it gets bigger.

b. Because you have no payments today, you are trading for a larger payoff tomorrow. A borrower passing away is usually the reason a reverse mortgage gets paid off, so they have effectively, permanently deferred the house payments.

3. The fees on a reverse mortgage are expensive:

a. Reverse mortgages are traditionally expensive compared to a regular loan. The thing to consider is that on a regular loan you have to make payments and on a reverse loan, you don’t. I guess “they” feel the extra expense is justification for more fees.

b. With the development of new programs, you should be able to get a reverse mortgage for about half the prior cost. If the expense of the loan was the reason you didn’t do the loan before, check again. You should be pleasantly surprised on how in-expensive the fees are now.

4.You leave less money to your kids:

a. It will reduce the amount you leave as an inheritance, if you spend your equity. This could be really important to those who want to leave a sum of money to their heirs, but there are alternatives to how you leave the “money”.

b. By using your equity, are you really shorting anyone on their inheritance? Removing your existing monthly payment will allow you to have more cash for things like medical or housing expenses. Because of this, you children are less likely to need to contribute to your monthly bills. Just that alone will help them save for their own retirement, without having to worry about your finances. If you are more fortunate than most, and your home is paid for, using the equity in your home can help maintain your independence and enhance your retirement.

These are examples of the so called disadvantages of a reverse mortgage. You can see that there are two sides to these arguments. So weigh the need against the objection and see if it makes sense to you. If you are looking for someone to bounce some ideas off of, feel free to give me a call or send me an email. You can get all of our contact information at www.redwoodreversemortgage.com along with more reverse mortgage information.

Are there other reverse mortgage disadvantages? Follow the links if you are looking for more information on reverse mortgages. You can get a no obligation, free education. You can even use our free reverse mortgage calculator.