Reverse Mortgage, When?

Reverse Mortgage, When?

While a reverse mortgage is not the perfect fit for all senior homeowners, when it is the process and financial security are well worth it. During the past year I have been working with several families that we're interested in getting a reverse mortgage, but would never commit to the process. Either they were getting comfortable with me as their broker or educating themselves about the loan. The one problem was their home values were falling during this time, some had appraisals done and were happy with the amount of money they would receive, but decided to wait. Unfortunately for the seniors the reverse mortgage was no longer desirable option because their home values had fallen to a point to where the seniors were bringing money to the close, instead of receiving money. Seniors should be aware that the FHA appraisal that they receive today only last six months, and with the current real estate situation, property values look to be heading lower.

Seniors need to be educated and reminded on how their home value may dictate when a reverse mortgage may be attainable.

An example of this situation happened to the Parker family, where in early 2008 Mrs.Parker had an appraisal done on their home in Florida. Mrs Parker wanted to go through with the loan, but Mr.Parker was apprehensive and wanted to explore other options at the time. We kept in constant contact with the family and informed them that the FHA appraisal would only be valid for 6 months. They kept saying they understood this but by the time Mr. Parker agreed that a reverse mortgage was the best option, it was after the 6 month period. When they got their home re-appraised the Parker's home no longer appraised at a value that made the loan attractive. If they had obtained the loan on the previous appraisal they would have pocketed substantial funds, where as if they obtained the loan with the latter appraisal it would have cost them money to close on the loan.

This unfortunate event happened to more than just a few of my clients recently, where they simply waited too long to complete the loan. In some situations, what looked to be a smart financial decision in early to mid 2008 could have possibly turned into a financial disaster if the client decided to go ahead and complete the loan in the later part of the year. Homes simply were not appraising for the same value they did just months earlier! This caused the loan to not be a viable option any longer. These unfortunate situations have caused me to make even more of an effort to educate seniors and their families on how their Loan to Value comes into play in a declining housing market where homes are losing value at an alarming rate. Our clients are encouraged to get the appraisal on their home done and consider all the facts before making a decision to obtain a reverse mortgage. Unfortunately, due to the rapid decline in home values, timely decisions are very important. In certain situations if the senior waits too long they may not have the option of doing the loan at all.