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Factors When a Reverse Mortgage Makes Sense
Sometimes it is not a question of if but when a borrower should take a reverse mortgage. As reverse mortgage loan originators we must be careful of straying into giving financial planning advice, however we should be aware of the factors that come into play when borrowers decide to get a reverse mortgage now or later.
First: Need. The vast majority of potential borrowers who come to you are driven by financial need. The danger lies in that the homeowner’s current needs may overshadow long-term considerations. Typically our prospects are needing more monthly cash flow in retirement and therefore are looking to their largest asset: their home. With fewer American’s retiring with a company pension and underfunded 401(k)s it comes as no surprise that financial need drives most prospects to seek a reverse mortgage.
Second: Interest rates. Today both traditional and reverse mortgage loans have historically low interest rates giving borrowers access to more funds than a more normal interest rate environment would provide. Be sure to inform undecided…
Download a transcript of this episode here.
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2 Comments
First, it is great that Shannon recommends not providing financial advice. Yet the admonition can and should apply to any area beyond our publicly and legally recognized and acknowledged expertise(s). My doctors do not provide any kind of accounting or attestation services, real estate services, mortgage financing, or tax services and I do not provide medical services of any kind.
Second, Shannon pointed out a very significant issue and that is the tendency to over appreciate current wants/needs. Borrowers should not go into a major financial transaction without having a realistic financial plan which has been reviewed with a competent financial adviser, even a CFP or CPA. Without such a plan, how can the borrower understand how to maximize the proceeds available to them and not “waste” substantial portions of their proceeds.
Should marital difficulties enter into the reverse mortgage decision? That is a very difficult question to answer. I know several marriages where nothing appeared at risk and without warning, the couple terminated their marriage. I have also known several marriages where things were rocky from the beginning but 35 years later they are still together. Many times just addressing the matter can be touchy. This is one reason why working with a financial advisor can be a big advantage since they are probably aware of the situation and with your help can provide guidance on the reverse mortgage decision to a couple.
(The opinions expressed in this comment are not necessarily those of RMS or its affiliates.)
YOU SHOULD ALSO BE A FORTUNE TELLER AND SECOND GUESS THE CFPB ,FHA,AND HUD AT MAKE A DECISSION. WILL THESE PEOPLE BE ABLE TO QUALLIFY IN THE FUTURE,,,,,WHAT EVER HAPPENED TO YOUR COMMON SENSE THAT WAS TAKEN AWAY WITH YOUR EDUCATIONS ?? COMMON SENSE AND COMPATION SHOULD GUIDE YOU RATHER THAN REFER SOMEBODY THAT DOES NOT KNOW R.M.s AND HAS AN AGENDA TO GET MORE MONEY IN THE STOCK MARKET AND GAMBLE WITH A SENIORS ASSETS