1. Using Reverse Mortgages for Short Term Fixes.

The cost of a reverse mortgage would normally make it a mistake to use for a short term fix. While there are definitely times to use it short term, think of a reverse mortgage as something you are going to use for the next 10+ years. In the event that you are in some serious financial dire straights, like possible foreclosure or in need of repairs to make your home habitable, it may make sense to do a short term reverse Loan. Being aware of the fees associated with the loan will help you determine whether or not you are making the smart choice. Of course, a trusted loan officer will be able to guide you, but ultimately, you need to be the one making the decision.

2. You Could Lose Government Benefits After Closing Your Reverse Loan.

The most common benefit we are talking about is Medicaid. There is a restriction on how much cash and assets you can have when being on this program. This can happen when a senior takes a reverse mortgage and gets a lump sum of money to do some repairs around the house. They get $20,000 to do a new roof and some much needed deferred maintenance, and put it in their bank account. While the repairs are being done, the money sits there and when the new month comes around, Medicaid disqualifies you for “having too much money”. Another example is; if you are short on money each month, say $200.00, and you opt to get a monthly income of $400.00. If you make the mistake of saving the extra money, you could, after several months, disqualify yourself when your savings gets “too large”.

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

Did you know that a bank loan officer is not required to be licensed? They are not required by the State to do any education on proper ways to handle loans. It is literally possible for anyone; yes anyone, to become a loan officer in a bank. Just apply and say “I want to do loans”. They will probably give you your own desk and have you start talking to clients. Maybe I am a bit biased, but I like the idea of talking to a professional that has been trained and licensed to do the job correctly. Because the paycheck has been historically pretty good for the loan officer, a new loan officer will typically try to make as much money on a loan as possible. Because reverse mortgages are basically all the same as far as terms go, you should interview the potential loan officer and see if they are qualified to be your loan officer.

4. Not Doing a Reverse Loan For Fear of Them.

It seems very common to find people that are afraid of a reverse mortgage just because they can’t find someone that they can trust to explain it in a way they can understand. When it sounds too good to be true, they tend to shy away. Let me start by saying there are always “experts” on topics that they know nothing about. Even for someone who knows the truth, it is almost overwhelming the amount of disinformation being spread. Some financial planners will tell you that you could lose your home. Others will say you are going to leave more debt to your heirs. In an attempt to soothe your concerns, here is a little advice. First, find a loan officer you trust. If you are uncomfortable with your current loan officer, find another one. You are not obligated to anyone just because you talked to them first. Second, don’t listen to everyone’s advice that throws it at you. You can read the article “Bad Advice From Good People about Reverse Mortgages” and get an in depth look at who to listen to. To summarize it, you should look to get advice from the professional in the field. Your financial planner may be great with your investments, but has probably never originated a loan. It is always recommended to get advice from your loved ones, but make sure they know what they are talking about. Maybe invite them to listen in on your next meeting with your loan officer. Also, please don’t disqualify yourself because you think you may not qualify. Just to reiterate, get the advice from a professional in the mortgage industry that specializes in reverse mortgages.

5. Rushing Into the Reverse Mortgage Process.

It only takes about 10 minutes to teach you everything you need to know on a reverse Mortgage Loan. But you will probably have questions that will make you more comfortable when you get the answers. Sometimes these questions take a little time to formulate, so don’t let your loan officer rush you into making a decision. Don’t mistake doing your loan quickly with pushing you to make up your mind in a hurry. Once you have determined you want a reverse mortgage, the process should be fairly quick. It will take about a month to a month and a half to get your loan closed.

6. Thinking That Being Older Will Get You More Money.

Here is a bonus mistake. Remember your age and the value of your home combined with the interest rate determines how much money is available to you. While being a few years older can net you a few thousand dollars more, an interest rate change of 0.5% higher can make tens of thousands of dollars less available to you. So while it is true that you get more money when you are older, you have to consider that the interest rate will probably go up. Then any age benefit you were getting will be lost.

See more articles and blogs at Redwood Reverse Mortgage. David Prulhiere is the owner of Redwood Financial Services and specializes in reverse mortgage education and loans.