Reverse mortgage has been put in the spotlight or under a microscope for consumers to examine. Some believe it’s a great help for seniors in dire financial need, others put it in a bad light.
It’s always good to look at all sides of the story before plunging ahead, especially when it comes to matters about your finances and assets and the effects your actions can have on your future. You can be a victim, or you can use the reverse mortgage to your advantage by gathering all the relevant facts and making sure you understand the program and mapping out a plan.
Here are some tips that might be very handy as you consider obtaining a reverse mortgage.
It is important that you get to know your reverse mortgage lender or broker. Be wary of reverse mortgage companies that claim they are a nonprofit group. In the same vein, stay away from brokers or lenders who claim the work for the government. There are many fraudulent reverse mortgage lenders out there. A reputable and legitimate lender or broker should state that they are merely an organization that offers a loan to consumers.
If the reverse mortgage loan officer charges you an application fee of any kind, leave. The counseling fee is the only upfront fee you need to pay when applying for reverse mortgage. Other fees should be rolled into the loan and not paid outright.
Legitimate reverse mortgage providers will not process your loan application unless you have completed the FHA-mandated counseling part. The third-party counseling session is a very helpful aspect of the application process – a counselor will explain how reverse mortgages work, the costs associated with it, payment options available to you, as well as the tax and financial implications of obtaining such a loan. The counselor will make sure you understand what you are getting into, as well as make suggestions for alternatives to the reverse mortgage.
Even after you have completed your counseling session with a third-party HUD-approved reverse mortgage counselor, you may still have questions that you want to pose to your lender or broker. In this case, he or she should be able to answer all of your inquiries satisfactorily.
Your lender will not be entitled to take away the title to your home in a reverse mortgage. The title to your home will always remain in your possession; the lender will only place a lien on your home, just like in a traditional home loan.
The decision to obtain a reverse mortgage loan can be a sensitive topic for most families. The parents and the children have reasons for wanting to or not wanting to go through with it and both parties need to sit down and discuss various factors when considering a reverse mortgage, such as potential costs associated with nursing home care, and selling or renting the family home. Another factor to consider is that the heirs of the estate can become financially liable for the balance of the loan once the reverse mortgage becomes due. Additionally, the balance may be greater than the value of the home.
You may want to explore other alternatives to a reverse mortgage, such as selling your home and renting or buying and moving to a smaller property. Try crunching the numbers and you might be surprised about the result. You may be able to find low-cost renting and this might make more sense than obtaining a reverse mortgage.