The Reverse Mortgage and Worst Case Scenario
The reason I'm writing this article is I'm getting many questions from my customers asking me if this is the reverse mortgage is the right answer for them.
You may not believe this but I always say it is not a great choice for everyone. Its situational and some borrowers should simply walk away.
The reason most are calling me is that money is extremely tight. There are the exceptions who are looking for investment money but most need the money.
Generally speaking most are on social security and some form of pension, but others are still working and planning on retirement.
When they ask me their question Im primarily focused on their long term equity position in their homes. They may need that equity if a major financial issue presents itself.
Every day of our lives we roll the dice. Sometimes it comes up snake eyes and we must be there to answer the call.
One of the problems of getting a reverse mortgage is all of the sudden an individual who is used to living on nothing has tons of money to spend. I caution to use discipline with the reverse.
These borrowers have worked very hard to build up the equity in their homes. It is their nest egg, and if it is squandered what money will be there for them if they really need it?
If the concern is for the event of a major financial mess then the borrower needs to be very prudent. Many want to pay off a mortgage and eliminate that payment. Waiting to do this may be a good idea.
Some have their home paid off and simply want to add to their income. These folks should use a line of credit. By doing so a very small amount of interest accrues against the equity of the home.
Additionally, the unused funds in the line of credit will accrue interest for the borrowers favor. The net effect of this is increased borrowing power over time.
There is no doubt the reverse mortgage serves a great financial purpose. However, it should be used with the utmost care.
You may not believe this but I always say it is not a great choice for everyone. Its situational and some borrowers should simply walk away.
The reason most are calling me is that money is extremely tight. There are the exceptions who are looking for investment money but most need the money.
Generally speaking most are on social security and some form of pension, but others are still working and planning on retirement.
When they ask me their question Im primarily focused on their long term equity position in their homes. They may need that equity if a major financial issue presents itself.
Every day of our lives we roll the dice. Sometimes it comes up snake eyes and we must be there to answer the call.
One of the problems of getting a reverse mortgage is all of the sudden an individual who is used to living on nothing has tons of money to spend. I caution to use discipline with the reverse.
These borrowers have worked very hard to build up the equity in their homes. It is their nest egg, and if it is squandered what money will be there for them if they really need it?
If the concern is for the event of a major financial mess then the borrower needs to be very prudent. Many want to pay off a mortgage and eliminate that payment. Waiting to do this may be a good idea.
Some have their home paid off and simply want to add to their income. These folks should use a line of credit. By doing so a very small amount of interest accrues against the equity of the home.
Additionally, the unused funds in the line of credit will accrue interest for the borrowers favor. The net effect of this is increased borrowing power over time.
There is no doubt the reverse mortgage serves a great financial purpose. However, it should be used with the utmost care.
posted by Credit Counseling at
5:53 AM
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