Wednesday, July 24, 2013

Reverse Mortgage | Timing Is Everything

There is a popular saying that "Good things come to those who wait".  While this is true for somethings it's not for reverse mortgages.  There has been a lot of news lately about changes in the reverse mortgage program that are coming down the line.  For most reverse mortgage customers these changes will not be a good thing so literally, if you've ever considered the reverse mortgage or know someone who has...NOW IS THE TIME!  If you wait much longer it may be too late.

Currently the reverse mortgage allows a borrower over 62 years to access a portion of the equity in his home without any payment due for as long as he lives in the house.  In order to get the loan, you have to be old enough, have enough equity, and the home has to pass an FHA inspection and be your primary residence.  If all these things check out then you can take the money you qualify for in either a lump sum, line of credit, or a monthly payment to you.  With the increasing numbers of baby boomers retiring the reverse mortgage option has been gaining popularity over the past few years.

So why is now the time to get a revere mortgage as opposed to next year, or even 5 years from now?  The answer has to do with property taxes and homeowners insurance.  The reverse mortgage is an FHA insured loan; meaning if the borrower defaults or if the loan goes bad then the FHA will step in and help cover the losses.  Because the reverse does not require a monthly payment, the only way to default on the loan is to not pay your property taxes or insurance; which is exactly what is happening at a fairly large rate!

Most mortgage companies collect money for property taxes and insurance every month when you make a payment.  When a senior gets a reverse mortgage if they've been used to having the mortgage company collect and pay for these bills can easily forget about them. Unfortunately this is happening and about 10% of reverse mortgages are now in default for the borrower not keeping taxes and insurance current.  Also many borrowers when they take out a reverse are having all the money they qualify for be issued in a lump sum.  This is their choice, but if they run out of money too quickly then paying taxes and insurance my be a bigger burden.

So like with anything that government is involved in that's not working right, the government feels it necessary to come in and fix it; which is exactly what is about to happen with reverse mortgages!  The proposed changes have passed the House and are currently on the way to the Senate and if they stay as they are I will repeat myself again...Now is the time to consider the reverse mortgage!  Some of the changes will be credit based, meaning if you don't have good credit you can be turned down!  There is also talk of a "needs assessment" which would take a look at your income and assets and if you don't really need the loan based on government guidelines then you will be turned down. If you do still qualify after you have jumped through all the hoops then their is a chance the lender will be forced to hold back a certain amount to help cover taxes and insurance should you fail to keep them current.  Bottom line; the equity in your house which is your money is going to be harder and harder to get access to.  So if you've ever thought about a reverse mortgage but decided to wait a few years until you need it more, or are just on the fence its time to take another look.  To get more details on the proposed changes call 801-372-9636 or visit

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