Three big things and three little things to watch

Whenever you are considering doing a reverse mortgage (and I believe that 90% of seniors would benefit by doing a reverse mortgage), you should watch the three big indicators of what this entitlement will do for you.

1) If you are taking money out, take a look at the loan schedule and see how fast the loan grows, how fast the credit line (remaining equity) grows, and lastly how much you are actually getting. (Remember to account for any payments you are saving from not having to pay an existing loan payment since it was paid off by a reverse mortgage)

2) If you are not taking money out, take a look at the loan schedule and see how fast the credit line is growing. This is the amount that you can take out at any time for emergencies and/or to give a gift to someone. See how long it takes for that credit line to be worth more than your home. (Remember the reverse mortgage is a non-recourse loan, so you can give the entire credit line to your heirs while you are still alive, tax free, and simply turn the house over to the bank after you die.)

3) If your family wants to keep the home after you pass away, and not sell it like most estates are doing now these days, then watch your loan balance. Remember, a reverse mortgage grows at only 1.5% above the 10 year treasury bill. This is the lowest percentage rate in the industry. You can pay the reverse mortgage all the way down to $1,000 before the bank will try to close the account. Emergencies happen. With a huge credit line over time, you will be ready for the emergency. If you don't use the money, your heirs will still have the home and still get the tax deduction for all of the interest you paid. The easiest way to explain this benefit is to remember that a home is your family and not the bricks that make up your house. Getting a reverse mortgage and NOT spending the money is a great way to make sure you are doing the best thing for your family and not just the house.

The three little things to watch are:

1) Service fee....make sure you negotiate your way down to the minimum $25 service fee.

2) Referrals : Does your mortgage company take care of, and actually communicate with its customers after the loan?

3) Annuities : Make sure you do not jump into an annuity with the cash from your reverse mortgage. You should be signing a paper in your loan documents that makes the lender announce any annuity that is included in the loan. Some states have even outlawed this practice. Do not do it under any circumstances.

Bob

bob@az62.com

www.az62.com

623-214-6663