Getting a Good Deal on a Reverse Mortgage Loan
If you are considering a reverse mortgage, shop around to compare your options and the offered terms. Learn as much as you can about reverse mortgages before you talk to a counselor or lender. It will help you ask more informed questions, which could lead to a better deal.
- If you want to make a home repair or improvement or need help paying your property taxes, you may want to find out if you qualify for any low-cost single-purpose loans that may be available in your area. Area Agencies on Aging (AAAs) generally know about these programs. To find the nearest agency, visit the Eldercare website or call toll-free, 1-800-677-1116. Ask the AAA for information about available "loan programs for home repairs or improvements," "property tax deferral," or "property tax postponement" programs.
- If you are interested in a federally-insured HECM, know that all HECM lenders must follow HUD rules and that many of the loan costs (including the interest rate) will be the same no matter which lender you select. Still, some costs, including the origination fee, other closing costs, and servicing fees, may vary among lenders.
- If you live in a higher-valued home you may be able to borrow more from a proprietary reverse mortgage, but it generally will cost more. The best way to see key differences between a HECM and a proprietary loan is with a detailed side-by-side comparison of future costs and benefits. Many HECM counselors and lenders can provide you with this important information.
- No matter which type of reverse mortgage you are considering, be certain you understand all the conditions that could make the loan due and payable. Ask a counselor or lender to explain the Total Annual Loan Cost (TALC) rates, which show the projected annual average cost of a reverse mortgage, including all itemized costs.
Be a Savvy Consumer
Be cautious if anyone tries to sell you something -- for example, an annuity -- and suggests that a reverse mortgage would be an easy way to pay for it. If you don't fully understand what they're selling, or you're not sure you need what they're selling, be even more skeptical.
Keep in mind that your total cost would be the cost of what they're selling plus the cost of the reverse mortgage. If you think you need what they're selling, shop around before you buy.
No matter why you decide to take a reverse mortgage, you generally have at least three business days after signing the loan documents to cancel it for any reason without penalty. Remember that you must cancel in writing. The lender must return any money you have paid so far for the financing.
Legal Advice on Good Deals
By their nature, reverse mortgages involve unique risks. To educate yourself about the pitfalls of obtaining a reverse mortgage and to assess whether one is appropriate for your unique circumstances, consider obtaining legal advice from an experienced real estate lawyer.
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