By Alain Valles, CRMP, MBA, CSA
You’ve heard the word reverse mortgage and likely know that for those who qualify they can receive a lump sum of cash, a monthly stream of cash, a line of credit that grows over time, or any combination of the three. All without ever being required to make a monthly payment for the rest of their lives as long as the real estate taxes and insurance are paid and other guidelines met.
But, the perception persists that reverse mortgages are expensive. With improvements to the program, the cost of many reverse mortgages has dropped by over 30 percent. And in some cases, there are no closing costs. But “cost” should be viewed in terms of your goal to be financially independent, stay in your home, and have peace of mind about your financial future. Below are the most important “cost” issues to consider.
Cost compared to a traditional mortgage
Obtaining a conventional loan is not always less expensive. If you currently have a large mortgage balance the cost of a reverse mortgage can often be substantially reduced. If you have no mortgage than the reverse mortgage will likely be more expensive than a traditional refinancing. The good news is the upfront out-of-pocket costs are very similar. Another advantage of a reverse mortgage are the more lenient qualification guidelines. There are even options for those with lack of income or poor credit histories.
Cost to move
Many people don’t factor in the cost of moving. A real estate agent commission of 6 percent, needed home improvements, paying a moving company, getting rid of personal belongings, and the emotional cost of downsizing is very expensive. Selling a $300,000 house can cost over $30,000. And where will you live? Can you afford to pay rent? Even moving in with relatives is seldom free. A reverse mortgage gives you the option to afford to stay in your own home and remain financially independent.
Cost of indecision
To me, this is the biggest challenge for seniors contemplating a reverse mortgage. Making a decision by indecision leaves the outcome to fate. Putting off talking to a reverse mortgage professional because everything is “fine” today only to be faced with an unfortunate life event and then wishing you had access to cash is so painful. There is nothing more demoralizing than hearing, “I should have gotten a reverse mortgage when I had the chance!” Regret can be haunting when it can be avoided.
Cost of Misinformation
Our loved ones and trusted advisors have our best interests at heart. But when it comes to reverse mortgages, more often than not, the advice being given is based on what they overheard – not the facts. Not everyone should get a reverse mortgage. But everyone should get reliable third-party facts in order to make your own informed decision. A great start is to receive your free National Council on Aging 36-page book called “Use Your Home to Stay at Home.” And, with no obligation, I’ll also be happy to share various scenarios for your situation. Just give me a call or email to receive your free copy today.
Alain Valles, President of Direct Finance Corp., was the first designated Certified Reverse Mortgage Professional (CRMP) in New England, received an MBA from the Wharton School and a Master of Science in Real Estate from M.I.T. He can be reached at 781-724-6221 or av@dfcmortgage.com or visit www.dfcreversemortgage.com.
