Delaying the Reverse Mortgage Decision

j0382674I have recently had several conversations with the seniors about waiting for the right time. In all financial decisions, timing is very important. I have posted other blogs about this very issue. However, we are at a time in the industry, as well as the economy, that waiting may be the wrong decision. Let me explain.

The reverse mortgage industry is in a unique situation. Interest rates, though in the past have not played as critical of a role as they are today. For many years, the only RM product used was a 1.50% margin. It very rarely changed, and when it did, it was an anomoly. We then saw the margins decrease to 1.0% then 1.25%. Today we live in an economic environment with live pricing. What intereste rates (spreads) were even a weeek ago, is likely different today. The secondary market (Fannie Mae) plays a critical role in these numbers.

My clients have been surprised by this phenomenon. Back in January the spread was at 2.50%, which provided x number of dollars of benefit. They thought they would wait a bit to make a decision. Well, today, that spread is at 3.25% or higher, depending on the lender. They no longer have the same amount of financial benefit that they did in January.  So, what should people do and how should they evaluate their situation. Here’s my take . . .

If, in evaluating a reverse mortgage provides the benefits that accomplishes your goals, why wait? In today’s ever changing market, home values are likely to stay level at best in the near future, and may even decline. Interest rates will likely go up, too. Margins are changing more than ever. Obviously, we want our clients to get the greatest benefit possible. But waiting for things to get better, in the short run, usually does not pencil out. More and more frustrated seniors are kicking themselves because they have waited. If the benefit accomplishes the goal, usually there is not a good reason to wait to move forward with the application. If it does not accomplish the goal, then it does not accomplish the goal and choosing not to move forward is probably the right decision.

Whenever there is confusion, it is wise to sit down with a good financial advisor . . . one who understands reverse mortgages and can assist you with decisions. I know several advisors that are non-partial and are available to give good advise, if needed.

Explore posts in the same categories: General, Reverse Mortgage Details

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