Joffrey Long: Reverse Mortgages - Wait and Lose $30,000

GRANADA HILLS, Calif., Sept. 17 /PRNewswire/ -- A recent article published by a major Organization for Retired Persons offers what looks like a poorly thought out suggestion. The article suggests that those considering a reverse mortgage "wait it out" for a year or two. While there may be some borrowers who truly are not yet ready to start a reverse mortgage, there are a number of potential problems, none of which were disclosed in the article.

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If anyone really considered "waiting it out," they would be wise to carefully consider the drawbacks:

1) Property condition problems: If there is deferred maintenance, waiting could cause two problems. One, the deferred maintenance could lead to bigger problems. (Moisture from leaky roof leads to mold, for example.) Also, some types of deferred maintenance could pose a health or safety risk to the elderly homeowner.

2) They may take ill and go into a nursing home, leaving them unable to apply for a reverse mortgage. Although the reverse mortgage becomes due and payable when the borrower moves out of the house for more than a year, they may keep any funds they already took out from the reverse mortgage. So if they got cash from a reverse mortgage while they lived in the home and saved some of the cash, even when leaving the home, they keep the cash.

3) Lost life opportunity: What if because of a lack of money they miss a chance to travel, spend time with grandchildren and loved ones, and generally enjoy life a little more? No amount of waiting will ever make up for these lost opportunities.

4) Property value declines: If the property value declines before they get the reverse mortgage, it could result in their getting less money.

5) Getting $30,000 less: This point inspired the title of this article -- it's MAJOR! The amount of money the reverse mortgage borrower gets is based on the interest rate in effect at the time they get the loan. Your client may be eligible for $190,000 in cash proceeds from the reverse mortgage today, but eligible for only 160,000 if interest rates are higher by the time they apply. This means that as a result of just waiting, someone could lose thousands of dollars!

Another interest rate-related problem is the current elimination of the "HECM 100" program. This program provides borrowers with the lowest interest rate. After it's gone, the next best program will carry a higher interest rate, again resulting in less money to the homeowner.

Homeowners considering a reverse mortgage should carefully evaluate the decision, as well as when to move forward with the reverse mortgage. However, once someone has decided that getting a reverse mortgage is in their best interest, further delay could cost them a bundle.

[Writer Bio] Joffrey Long is a 30 year veteran of the mortgage industry and the President of Southwestern Mortgage, in Granada Hills, (Los Angeles Area) CA. He is the author of "Making Money with Reverse Mortgages" and the instructor of several training courses for loan officers. He's the 2007-2008 President of the California Mortgage Association. Southwestern Mortgage provides reverse mortgages throughout California and in Clark County (Las Vegas) Nevada. He can be reached at SouthwesternMortgage@socal.rr.com

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