How Do We Determine If A Reverse Mortgage Is Not Right For Us?
“Do you have any info on how to tell if a reverse mortgage is not right for you?” is a question I recently received from Stan Cohen of www.MaturityMatters.net. He stated that one of the big issues he hears about is that seniors are afraid that a reverse mortgage may not be right for them. He also stated that he has heard seniors are afraid of outliving their money and being forced from their homes. Additionally he expressed the concerns of being hospital/nursing home bound for over a year and negating their contracts.
Following is my reply to help seniors and their families have a better understanding and overcome their fears of reverse mortgages.
There are a lot of misconceptions about reverse mortgages and I believe this puts the fear into the seniors and their families.
A reverse mortgage is a mortgage just like any mortgage but with special terms for seniors 62 and older. With a reverse mortgage there are no income or credit score qualifications and no monthly mortgage payments. Another difference from a conventional mortgage is the reverse mortgage loan is not due and payable until the home is no longer the primary residence of the borrower or on their 150th birthday.
One can go into the nursing home temporarily as long as the home remains their primary residence and they are returning to the home within a year.
Once a reverse mortgage is in place, even if they use all their funds from the reverse mortgage the borrowers can stay in their home. The advantage is they don’t have mortgage payments to make which takes away the risk of foreclosure from not making a monthly mortgage payment.
Just like a conventional mortgage, borrowers are responsible for keeping insurance on the property, paying property taxes and maintaining the home. As long as they abide by the terms of the loan they are not forced from their home.
Some of my blog posts may help you clarify the facts:
“The Misconceptions of Reverse Mortgages Abound… What Do You Know?”
“Why Are You So Afraid of Reverse Mortgages?“
There isn’t a check list to say when one should or shouldn’t do a reverse mortgage or whether it’s right or not right for them. It’s very personal for everyone.
The first evaluation should be to determine if they qualify, i.e. they are old enough, the property qualifies, and they have enough equity to pay off any current mortgage(s).
Generally we say the reverse mortgage is not right for one who plans on moving in a short period of time. However I have seen where it has been a huge benefit to seniors and their families even when the home is sold in a short period of time after the closing. One needs to be educated on the pros and cons of the reverse mortgage for their situation and then decide if it will meet their needs.
One should work with a reverse mortgage originator who will take time to meet with the borrower and discuss their needs, goals, and situation and help them evaluate whether the reverse mortgage might benefit them or whether another option may better suit their situation. I’ve provided a checklist of questions to ask an originator in my blog article “Don’t Let Fear Keep You From A Reverse Mortgage… But Know What To Look For In A Lender.” On our Reverse Mortgages SIDAC website I have an updated version of this check list at http://www.rmsidac.com/WhattoConsiderWhenTalkingtoLenders.php.
Another article that may help is: “A Reverse Mortgage…Or? Other Options To Consider.”
I recommend you meet with a local originator rather than working with a lender from another state who just mails you an application package. You’ll receive more personalized service and information. We meet with our Minnesota seniors and usually spend two hours with them explaining the details of reverse mortgages and reviewing their situation along with the pros and cons. This is even before we do an application. The application is done in person, generally at their home, where we spend another hour and a half to two hours.
Do you go to a plumber if you are having health problems? No, you go to a doctor. And you don’t go to a generalist if you have cancer or heart disease, you go to the specialist. The same is true for a reverse mortgage, go to a reverse mortgage specialist/expert to get the facts and options for one’s situation then decide what will best fit your situation.
Hope this information helps you with your decision to explore a reverse mortgage to determine if it might be right for you.
© 2011 Beth Paterson https://bethsreversemortgageblog.wordpress.com 651-762-9648
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Beth's Reverse Mortgage Blog 
My husband and I are thinking of buying a new condo. I am 61 and my husband is 71. We are looking at doing a reverse mortage,however I am not old enough yet. What would be the best way to do this? Should we get a conventional loan for the first year? Should my husband get it in his name only with me as a beneficiary,and then refinance in a year? We don’t want to lose this property so I feel pressured to do someting,but I don’t want to make a mistake. Can you help?
Good for you for exploring the option before signing documents. While I can’t tell you what is right for your situation I can say that you should consider several factors. One, is the condo you desire to purchase FHA approved? Condos do need to be FHA approved to do the reverse mortgage – if not there is a process to get the approval and that could take some time. Is this a new condo – there are some different qualifications for new condos.
Second, when do you turn 62? You could start the process and go through the reverse mortgage processing and underwriting and then close on your 62nd birthday – this might be a good option if your birthday is within the next couple of months (and the condo is FHA approved). You would need to work with all parties involved (seller, real estate agents, reverse mortgage specialist, etc.) for the timing.
One of the risks of closing in your husband’s name only is that if something were to happen to him and he was no longer in the home as his primary residence the loan would become due and payable. You would then have to find financing to pay off the reverse mortgage or move.
Another risk would be whether you could qualify for enough funds to pay off the current reverse mortgage in the future. Being the loan amount is based on the age and the older one is the more they can qualify for, if refinancing under your age of 62 you would not be qualifying for as much as your husband would. If this becomes the situation would you be able to have funds to cover the difference?
Do you qualify for a conventional loan and can you make the payments?
If you are in Minnesota, Oregon or Washington I would be glad to discuss and work with you. I can be reached at 651-762-9648 or 1-877-590-9648. Or if you are in another state I would recommend you find a mortgage broker that specializes in reverse mortgages. Please review, “What to consider When Talking With Reverse Mortgage Lender’s,” found on our website, http://www.rmsidac.com/WhattoConsiderWhenTalkingtoLenders.php , to assist you in who to choose as your reverse mortgage originator.