When Should I Consider a Reverse Mortgage – is now the right time to consider getting a HECM loan. We have definitely experienced a higher number of reverse mortgage applications, could this be due to the economic crisis, is it because the limit on reverse mortgage has increased to $617,000, or because interest rates are low? The main questions here is” is this the right time for me to get a reverse loan“.
On Oct. 5th 2011, HUD approved to allow lenders to review your finances ( income & credit scores ) and this will be a factor in qualifying for the reverse loan, at minimum determine the rate you receive. If you are in the market you should consider taking a reverse now since there are many advantages to receive this loan now.
Key questions to ask yourself before knowing if this is the right time?
1.) Rates are low so now is the right time to secure a HECM based on that factor – but what is your goal with the home – do you plan on retiring in this home? we mention this as if your goal is to sell the home is 1 year it might not be worth it to take a HECM loan. Thus the actual property plan is important as this loan is really designed to be used for a longer term period. If you know you want to sell the home, you have to wait roughly 2-4 years in order for the fees to make sense.
2.) Could you benefit from a new income source or from paying off you current mortgage? take a look at your entire financial situation, those who currently have a mortgage can compare apples to apples ( example compare the interest rate on the HECM versus the current mortgage rate). Paying off your mortgage can greatly impact your quality of retirement, not having to pay your mortgage payment or selling the home can be the right solution.
3.) Timing – does your spouse qualify? what happens if your spouse is not yet 62 – should you still consider taking a reverse mortgage. This is a personal decision which needs to be based on the spouse who qualifies – how is their health, how much longer will it take for the other spouse to be able to get on the HECM, will there be enough equity to refinance into the new HECM, and does it make sense to pay fees again when the time comes.
Rates – as mentioned above the timing on the HECM rates is excellent as rates are really low.
Fees – there are lenders who are now doing no fee reverse mortgage so again this is a great time
4.) What about just waiting? well what are you waiting for – rates are not likely to go any lower – fees are also at their lowest points – if you spouse is not yet 62 you can wait, or if you are not sure what your plans are with the home you can wait; but seniors who are just waiting around this can also have a negative impact on your chances to qualify.
*** Update – now banks/lenders will start to consider your income, payment history, and credit scores for the HUD reverse mortgage – Metlife will be the first lender to implement financial underwriting - you can expect other banks to follow suit.
“Now is definitely the right time to be taking a HECM reverse mortgage loan since the introduction of financial underwriting is now official we are predicting tougher requirements in the near future. Banks/Lenders are now able to review your financial position in order to qualify you for this loan.”
Why Now – Reverse Mortgages Make Sense and The Timing is Right
- interest rates are historically low
- loan limit is at $625,000
- easy to qualify no income or credit score requirement
- regulations set to change in October 2011 ( tougher qualification are about to be set maybe even a financial underwriting passed which would make it so lenders can view your credit scores and your income)
- Many top lenders to choose from ( lenders are slashing fees – but hurry alot of retails bank are leaving the business )
All of those variables above can change at any time and make the reverse mortgage loan a less attractive proposition for senior homeowners. We are mainly concerned with the possibility of hud initializing tougher qualification requirements based on income or credit.
What are some decisions or tough questions I should be asking myself before deciding on a reverse mortgage
- Do you need to speak to your heirs ( family and expectations from your children is an important personal factor)
- Can you afford to pay the property taxes and insurance ( when you receive the reverse mortgage these fees have to be paid by you long term)
- How much money do you need? How fast? do you want lifetime income or a lump sum?
- How long do you want to live in your home? ( with a reverse mortgage you cannot move or live in another property for more than 12 months)
- Is there something you are trying to accomplish in retirement which can be done with some money behind it – whether its travelling or starting a business this can be a great way to achieve lifelong dreams
When should you consider taking the reverse mortgage loan?
While this is a personal decision, there are some tips for those who are considering a reverse loan – the current economic time are all pointing to lower home prices for the next few years.
If property prices are not stable then it becomes harder for you to qualify for the HECM reverse mortgage, our suggestion is that if home prices continue to drop then you will be in a worse financial position. Reverse mortgages are mainly based on the equity of the home and this is one of the most factors when qualifying for the reverse.
In certain areas such as FL, CA, AZ, and other states that have suffered from the mortgage meltdown, these issues are stronger and seniors should consider the benefits of taking a reverse mortgage before home prices drop again. ( selling home is also becoming very tough)
to learn more visit:
how does are reverse mortgage work
reverse mortgage pros and cons
reverse mortgages how they work
what is a reverse mortgage
reverse mortgage information
reverse mortgage calculator
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