Keep Worst Case in Mind When Using Reverse Mortgage
The reason I'm writing this article is I'm getting many questions from my customers asking me if this is the reverse mortgage is the right answer for them.
The truth is the reverse mortgage is not a great decision for all borrowers. Situations are unique and they must be evaluated individually.
The reason most are calling me is that money is extremely tight. There are the exceptions who are looking for investment money but most need the money.
The typical MO of my customer is a fixed income through SS or retirement. A few are still working but looking to be done with that.
My concern is the worst case scenario. If someone really ran into a major financial need, like a medical issue, would they be able to handle it?
As we get older big medical needs are more likely, not less. As mature adults we must be prepared.
Along these lines I like to see prospective borrowers use the mortgage intelligently to increase their disposable income and to use that income in the proper places.
These borrowers have worked very hard to build up the equity in their homes. It is their nest egg, and if it is squandered what money will be there for them if they really need it?
The point here is to use it as a last resort. If it is possible to keep making mortgage payments on a current mortgage it may be best to keep doing so and wait to pay it off with a reverse mortgage.
Some have their home paid off and simply want to add to their income. These folks should use a line of credit. By doing so a very small amount of interest accrues against the equity of the home.
Additionally, the unused funds in the line of credit will accrue interest for the borrowers favor. The net effect of this is increased borrowing power over time.
There is no doubt the reverse mortgage serves a great financial purpose. However, it should be used with the utmost care.
The truth is the reverse mortgage is not a great decision for all borrowers. Situations are unique and they must be evaluated individually.
The reason most are calling me is that money is extremely tight. There are the exceptions who are looking for investment money but most need the money.
The typical MO of my customer is a fixed income through SS or retirement. A few are still working but looking to be done with that.
My concern is the worst case scenario. If someone really ran into a major financial need, like a medical issue, would they be able to handle it?
As we get older big medical needs are more likely, not less. As mature adults we must be prepared.
Along these lines I like to see prospective borrowers use the mortgage intelligently to increase their disposable income and to use that income in the proper places.
These borrowers have worked very hard to build up the equity in their homes. It is their nest egg, and if it is squandered what money will be there for them if they really need it?
The point here is to use it as a last resort. If it is possible to keep making mortgage payments on a current mortgage it may be best to keep doing so and wait to pay it off with a reverse mortgage.
Some have their home paid off and simply want to add to their income. These folks should use a line of credit. By doing so a very small amount of interest accrues against the equity of the home.
Additionally, the unused funds in the line of credit will accrue interest for the borrowers favor. The net effect of this is increased borrowing power over time.
There is no doubt the reverse mortgage serves a great financial purpose. However, it should be used with the utmost care.
About the Author:
Live in Texas.. learn about the HECM right here. Also, in 7 minutes you can know what you need to know about the Texas reverse mortgageright here.
posted by Credit Counseling at
5:02 AM
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