Home Value Decrease Hurts Seniors

j0399681.jpgFor many months I have been working with a couple as they await the proper timing for them to get into a reverse mortgage. They currently have an adjustable rate mortgage that will reset within the next couple of months. Over the past year it was their assumption that the value in their home would be in the mid $300’s (thousands). At this value they would have enough equity in their home to pay off their current mortgage, and have some left over to put in a line of credit. They have been excited over the past year or so as this would give them the opportunity to get rid of their mortgage payment and live more comfortably.

Two months ago I did a basic evaluation of their property. I am not an appraiser, nor do I think I can even pretend to be one. However, by just looking at home sales in the area, I was dissappointed to see that their were virtually no sales over the past 6 months that sold for over $300k. What is the likelihood of the appraiser giving a value of anywhere around $350k? Not very likely! In fact, after looking at comp’s in the area, it is more likely to be closer to $300k than $350k. This poses a problem!

By doing a reverse mortgage, and paying off the current mortgage balance, my clients would now be in the hole about $30k. Ugh . . . .  Who would have thunk it? We are currently evaluating all options, including doing a simple refinance, which they are not too excited about. But in all reality, it might just buy them enough time for values to get back to where a reverse mortgage would make more sense.

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