It seems as though a lot of people that I have talked with lately are taking a very cautious, wait and see position in regards to getting a reverse mortgage.
While being cautious is not necessarily a bad thing, it could cost you access to additional equity in your home, to wait to get your reverse mortgage in
Right now property values are up and interest rates are down, a perfect combination for reverse mortgages.
About a year ago, finan-cial advisor and author, Jane Bryant Quinn, wrote, “Get a reverse mortgage now, especially if you don’t need the money.” Prominent
mortgage professional and author, Jack Guttentag, aka “The Mortgage Professor” said the same thing.
While they were caution-ing about the changes that took place last fall, that reduced the principal limit, the underlying concept remains un-changed today.
It makes financial sense to establish a line of credit through a reverse mortgage that will grow larger and is guaranteed never to be reduced or cancelled
as long as you live in the home, pay the property taxes and home-owner’s insurance and maintain the home.
Interest rates are low now, which helps you get the most money from the loan that you can, but we all know that they will be going up soon (the Fed is
talking early 2015).
If the rates go up before you have your reverse mortgage in place, you will get less money.
As an example, I am working with a wonderful lady right now who is about 70 years old and she told me she plans to work a couple more years and does not
want to do a re-verse mortgage right now. I worked up numbers for her at today’s rate on an annually adjustable rate program.
With a $180,000 home, she would qualify to receive $98,550 after closing costs. Her line of credit grows at a rate of 4.185% which is 1.25% greater than
the rate that she is being charged of 2.935%.
In two years, assuming she does not use it, her line of credit with grow to $107,141. If the rate increases by just 1% over the next two years, (a very
conservative estimate), she would only have $83,042 available after costs and this is based on her home appreciating to $195,000.
By getting her reverse mortgage line of credit in place today, she is increasing her available funds by over $24,000. ($107,141—$83,042).
Instead of assuming that everything will be the same when you are ready for a reverse mortgage, you should do some re-search now to see the pros and cons