1. Using a Reverse Mortgage for a Short Term Fix.

While there are definitely times where a short term fix is needed, the cost of a reverse mortgage usually makes it more beneficial if you are going to keep it for several years. If foreclosure is imminent or there are repairs that need to be made to your home that can’t wait, then it makes sense short term. Knowing the actual fees associated with your new loan will help you determine if it makes sense for you. A trusted loan officer will be able to guide you, but ultimately the decision should be yours.

2. A Reverse Mortgage Can Affect Your Government Benefits.

The benefit that is most commonly affected is Medicaid. If you are on it, you know that there is a limit to how much cash you are allowed to have to be considered for this program. What can happen is; the senior uses a reverse mortgage to get a lump sum of money to do some repairs to their home. They withdraw $20,000 and put it in the bank waiting for the work to get done. When the new month rolls around, they have exceeded the Medicaid limits, and now can be disqualified. Another way that it can happen is when using a reverse mortgage to get additional income monthly. If you needed only $200.00 a month to make ends meet, but you got $400 a month so you could have a buffer, after several months you could save up “too much” money and be disqualified.

3. Using an Inexperienced Loan Officer to Process Your Reverse Loan.

It may be hard to believe, but bank loan officers don’t have to be licensed or trained to the States standards. On the other hand, mortgage brokers have very strict criteria set by the State to be allowed to do loans for the public. Virtually anyone can be a loan officer at a bank and experience is not necessarily a requirement. You could walk into a bank, apply for the job, and be taking applications in a very short period of time. It may be a bit biased, but I would prefer to deal with someone that is a trained professional, one that is licensed and can be held accountable to the State. Since the commission that a loan officer earns can be pretty high, it can tempt the younger, less experienced ones to overcharge in the hopes of making a big payday.

4. Avoiding a Reverse Mortgage Loan Because of Fear of the Unknown.

Not knowing who to trust can be a cause of fear when searching for a reverse mortgage. You should never use someone you don’t feel you can trust completely. You are not required to use anyone just because you met with them for a short period of time. Make sure when you get your advice, that you get it from a source that knows what they are talking about. There is an article titled “Bad Advice From Good People about Reverse Mortgages” you should read. It will help you identify who to listen to. Basically, it talks about making sure the person giving the advice knows what they are talking about. A wall full of degrees doesn’t mean they know the details of the lending business. In other words your doctor is probably a very educated man, but would you go to him if you wanted stock advice? Another thing is; don’t disqualify yourself because you think you know the rules. It doesn’t hurt to talk to a mortgage professional and get their opinion.

5. Being Pushed into a Reverse Mortgage Loan.

You can learn everything you need to know about a reverse Mortgage Loan in about ten minutes, but I think you should let the information you receive sink in. You should never let a loan officer push you into doing the loan. You should feel comfortable with whom you are dealing. Now don’t confuse the processing of your loan in a hurry with rushing you into a loan. Once you are comfortable with your decision, the company you are working with should try to close the loan as quickly as possible. Once the process gets rolling, you should be able to close your loan in 30-45 days.

6. Waiting Until You are Older So You Can Get More Money.

Bonus mistake: I know I said five, but this one came up while typing this. Waiting until you’re older is not always the best option. With rates being so low and terms being so good, it probably makes more sense to do the loan now rather than later. This is because adding another year or two to your age will get you a little more money. But, if the interest rates go up just a half of a percent, it could make thousands of dollars difference. The point is; Lower rates trump age, assuming all potential borrowers are at least 62 years old.

Read more about reverse mortgages at Redwood Reverse Mortgage. David Prulhiere owns Redwood Financial Services and is a specialist in reverse mortgage education and loans.

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