When it Comes to Reverse Mortgages, Sooner is Better than Later……….. Reprint from The Union Nevada County Newspaper

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seniors walking in fall

Happy Fall !   Here is a reprint of an article from the Union Newspaper of Nevada County:

Clients come to me to: establish a reverse mortgage credit line, pay off an existing loan, or purchase a home. I then analyze their qualifications under current RM rules, emphasis on “current”.  Housing and Urban Development, “HUD”, creates RM lending rules. When HUD issues rule changes we receive little or no notice. However, HUD RM program changes do NOT affect a completed loan.

When advising client(s) they qualify for a RM loan, they may chose to “do the loan later”. Upon return my “later” clients are unhappy to learn they no longer qualify, or if they qualify, HUD changes are not advantageous to them, some examples:

  • “Later” clients returned when one of them became dementia incapacitated, in-home care expenses were mounting, but it was difficult to establish a RM credit line loan to pay for expenses because using a power of attorney/conservatorship to initiate a RM loan, once one borrower has become incapacitated, is complicated. It is less complicated to use POA/conservatorship documents to keep credit line funds flowing to pay for expenses when the RM credit line was completed at a point in time when both borrowers had capacity. If one co-borrower remains living in the home with a RM loan, the other co-borrower may reside in assisted living if that need arises; also, the sooner a credit line loan is established, the more advantageous the credit line growth feature becomes.
  • A client wanted to pay off his existing mortgage with an RM loan, eliminating his monthly mortgage payment, thus increasing monthly liquidity. He was initially qualified but decided to wait. In the interim, HUD lowered the lending formula, creating a shortfall of lendable funds to pay off the existing mortgage. Having funds in a retirement account he is able to complete the shortfall to pay off the existing mortgage by bringing funds into escrow, but wishes he had completed the loan earlier.
  • New clients selling their home and wanting to purchase a replacement home with a reverse mortgage waited for a loan consultation until after their existing house was in escrow and a replacement home found, the wait caused a loss of the replacement home to a competing buyer; per newer HUD rules on RM purchase loans, 2-3 weeks advance planning with a loan officer prior to submitting a purchase contract on a replacement home is advisable.

 Shawna McDonald, Loan Officer has specialized in reverse mortgages loans for 10 years and is available by confirmed appointment; her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main St. Suite N, Grass Valley, (530) 497-3010. NMLS#271335 BRE #00585530 Borba Investments, Auburn, CA Company NMLS #76801 BRE# #01386892 As with all loans, it is required that property taxes and fire/casualty insurance be kept current.