When to Use the Reverse Mortage as a Solution
Reverse mortgages are becoming mainstream lately. Perhaps it's Robert Wagner, or maybe its life circumstance creeping up on today's seniors forcing them to use the reverse mortgage.
It is a viable financial tool, and if wielded properly, can be used as a powerful lever to solve financial obstacles.
That being said, it has shortcomings and is not the best tool for everyone. I'm often asked by my prospective customers, "Do you think this is the right thing to do?"
I'm flattered they trust me enough to ask the question. Don't forget I make money if they go forward with a reverse mortgage and zero if they don't. There may be a conflict of interest there somewhere.
However, I'm a pretty honest cowboy and I answer back, "How long do you plan on staying in the home?" This is the most important thing to know.
I want to know because short reverse mortgages should be used only in dire emergencies. The cost of getting the loan for a short period is very high due to the closing costs involved.
The answer I like to hear is, "I'll be in the home until they carry me out." As a borrower stays in the home longer the cost of the loan continues to decrease as the years go on.
The very minimum acceptable time period, outside of an emergency situation, is three years.
Living in the house for a term shorter than 3 yrs makes the loan quite pricey. I would strongly look at any and all other financial options in this case.
Another point is to match the relationship of the borrower's income to the problem the customer is trying to remedy.
For instance, some incomes can change to catch up to and solve an economic troublespot. Fixed incomes, on the other hand, usuallly cannot. The duration of the financial issue plays a role as well.
Here is your typical reverse mortgage customer... He plans on staying in the home at 3 years or longer. His income is fixed and can't change to meet his financial needs. The reverse mortgage makes sense for this man.
It is a viable financial tool, and if wielded properly, can be used as a powerful lever to solve financial obstacles.
That being said, it has shortcomings and is not the best tool for everyone. I'm often asked by my prospective customers, "Do you think this is the right thing to do?"
I'm flattered they trust me enough to ask the question. Don't forget I make money if they go forward with a reverse mortgage and zero if they don't. There may be a conflict of interest there somewhere.
However, I'm a pretty honest cowboy and I answer back, "How long do you plan on staying in the home?" This is the most important thing to know.
I want to know because short reverse mortgages should be used only in dire emergencies. The cost of getting the loan for a short period is very high due to the closing costs involved.
The answer I like to hear is, "I'll be in the home until they carry me out." As a borrower stays in the home longer the cost of the loan continues to decrease as the years go on.
The very minimum acceptable time period, outside of an emergency situation, is three years.
Living in the house for a term shorter than 3 yrs makes the loan quite pricey. I would strongly look at any and all other financial options in this case.
Another point is to match the relationship of the borrower's income to the problem the customer is trying to remedy.
For instance, some incomes can change to catch up to and solve an economic troublespot. Fixed incomes, on the other hand, usuallly cannot. The duration of the financial issue plays a role as well.
Here is your typical reverse mortgage customer... He plans on staying in the home at 3 years or longer. His income is fixed and can't change to meet his financial needs. The reverse mortgage makes sense for this man.
About the Author:
Discover the biggest mistakes to make for the Texas reverse mortgage here. A wealth of information and many Texas reverse mortgage answers are here.
posted by Credit Counseling at
10:37 PM
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