Decision Guide

Reverse Mortgage

Reverse mortgages allow seniors to convert the equity in their homes into available cash as:

monthly payments
a one-time sum
a credit line to be used in case of emergency

These payments provide seniors with money for:

living expenses
home improvements
pay-off of the existing mortgage(s)
other expenses

This unique financial tool can be the instrument that allows your loved ones to stay in their home as the primary resident. Homeowners must be in good standing with the property taxes as mandated by the United States Department of Housing and Urban Development (HUD) to qualify. Do your homework before signing any documents of this nature.

Services

Obtaining a reverse mortgage is most often a one-time event. Lenders will typically not allow simultaneous loans or refinancing. There might be exceptions in cases of increased equity.
For homeowners in bankruptcy, a reverse mortgage approval may take a longer than average time for processing.
Reverse mortgages can become costly for heirs or owners who move out of the home before death. All reverse mortgages have fees attached. Some fees accumulate throughout the term of the loan and can escalate over time.

Specialization

Seek a lender specializing in Reverse Mortgage with appropriate state lending credentials. Reverse Mortgages are insured by the Federal Housing Administration (FHA). The FHA does not charge a fee for referring borrowers to lenders. Some agencies do charge fees for placement and should be avoided.

Preparation

In order to qualify for a reverse mortgage – the following is true:

must be 62 years old to qualify
have sufficient equity in your home
do not need to qualify on the basis of your income and credit history

Understand the health prognosis of the senior in the home:

likely to live independently for years to come
struggling with terminal illness

Be able to describe the home. Are modifications planned if the following statements are false:

practical for an older senior
easy access and one story
wide hallways for wheelchairs or walkers

All financials will need to be disclosed:

value of the home; equity and pay off amount
monthly income from Social Security, pensions, annuities, and investments
remodeling expenses planned or underway
savings, 401-K, other investments

The only reverse mortgage program that is currently insured by the FHA is the Home Equity Conversion Mortgage (HECM).

Evaluation

Please provide Reverse Mortgage materials. After review, is pre-loan counseling offered?
Define credentials – are you a member in good standing with the National Reverse Mortgage Lenders Association and the Better Business Bureau?
Is your program FHA insured?
What are the fees associated with the reverse mortgage? Does the individual lender require additional fees above the PHA allowed closing costs?
Provide reasons that home owners should not move forward with this process.