Choosing a Reverse Mortgage Lender

What Is a Reverse Mortgage?
A reverse mortgage allows people over the age of 62 years to convert part of the equity they have in their home into tax free income without having to sell or take out a monthly mortgage. It is called “reverse” because the home owner does not pay the lender on a monthly basis; the lender pays the home owner.

Seeking a qualified reverse mortgage lender is important. In order to locate a reverse mortgage lender who best suits your needs and can answer your questions clearly regarding a reverse mortgage and all of its various financial implications, it is always best to interview several lenders.

What to Ask a Reverse Mortgage Lender
There are many pros and cons to obtaining a reverse mortgage. There are also many steps to the process which can be confusing. When seeking a company that will provide a reverse mortgage, it is a good idea to bring a list of questions with you. Among the questions you should be asking are the following, along with the answers you should be receiving:

1. How Much Money Can I Get?  The amount you get depends on variables such as your age or your spouse’s age if younger, the equity in your home, appraised value of your home, current interest rates and other issues. Generally speaking, you can receive more money if you are older, your home is almost or already is debt-free (no current mortgages) and the value of your home.
2. Does My Home Qualify? The types of property eligible for a reverse mortgage are single family homes, manufactured homes built after 1976, 2-4 unit multi-dwelling properties, condominiums and town homes. Some reverse mortgage lenders have private programs for cooperatives, which are not covered in reverse mortgages.
3. What Are My Payment Plan Options?  There are several options open to you: A lump-sum, a monthly amount, short or long term and other variables. There is also a line of credit option.
4. The Line of Credit option has a growth feature on the unused portion. Does that mean it pays interest?  No, it does not pay interest. There is no interest accrued like a savings account. It is the appreciation in your home’s value that is taken into account.
5. How Can I Use the Proceeds from a Reverse Mortgage? There is no restriction on how you are able to utilize the funds from a reverse mortgage.
6. How Does the Interest Work on a Reverse Mortgage? You are charged interest only on the money you receive. The majority of reverse mortgages charge variable interest rates.
7. Are There Any Special Requirements to Get a Reverse Mortgage? The only requirements for obtaining a reverse mortgage are that you're 62 years or older, that you own your own home and that there is enough equity in your home.
8. What If I Have An Existing Mortgage? You are able to obtain a reverse mortgage even if you have an existing mortgage. However, the reverse mortgage becomes the first lien on the property. That means that any current loan must be paid off. A reverse mortgage can be used to do that, leaving the balance for other things.
9. What Is the Service Fee Set-Aside? Once your reverse mortgage loan is closed, you are charged $30-$35 a month in addition to the loan amount. These fees are set by the FHA HECM, put in place to manage your account. It is configured through government formula.
10. Will I Lose My Government Assistance If I Get a Reverse Mortgage? A reverse mortgage will not affect any Social Security or Medicare benefits you are currently receiving.
11. Why Do I Need Counseling? Consumer protection is built into the reverse mortgage program to assure that you understand the process and expenses involved.
12. When Do I Pay Back The Loan? When you sell your home, or permanently move out of your home. If a sale, the amount owed will never exceed the amount of the value of the home and if the sale amount is higher than the loan, you receive the balance.