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.

Is it the best possible tool for everyone. If I said yes here you should stop reading and move on. It’s not. I get asked by my clients, “Is this right for me?”

It’s amazing how trusting some people are. God bless them. I am, after all, a loan officer who makes money only when the loan closes. If you are considering this as option get the facts and make up your own mind.

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.

Since I do make money when a loan closes I prefer them to indicate they will be in the home until death. As the loan goes on through the years it becomes less and less expensive annually to the borrower.

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.

The second point is to look at the relationship between the borrower’s income as it pertains to the problem which the borrower is attempting to solve.

Is the financial trouble going to last through the year or will it be lifelong? Are incomes variable, such that the issue, be it short or long term, can be overcome? Are incomes fixed?

The conservative answer to the question is if the borrower intends on staying in the home indefinately, and current or future income cannot solve the problem, a reverse mortgage is a viable financial lever.

Get an excellent guide to the Texas reverse mortgage by following this crumb. Discover 5 important questions to ask a reverse mortgage in Texas lender at this site.

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