How to Find the Right Reverse Mortgage Lender
Choosing the right reverse mortgage lender is a personal decision; what's right in one circumstance may be utterly inappropriate for another. Ensure that you seek the correct debt counselling before starting the procedure, and spend time investigating each potential lender to make sure it can meet your needs and the needs of those you will leave behind.
What is a Reverse Mortgage?
Introduced as a way to allow widows without their own income to keep their homes after the death of their husbands, reverse mortgages are now used as a vehicle for retirement funds by many seniors. The Home Equity Conversion Mortgage is the only loan of this kind insured by the Federal Government to provide extra security. For this loan, the lender releases some or all of the equity that borrowers have in a property in return for a loan agreement that is only settled when the last borrower leaves the home or dies. The loan then falls due and is usually settled from the proceeds of selling the home, though any inheritors may also settle the loan another way and keep the property. Because of the extra security that federal insurance offers, it's important to consider this type of loan first if you're considering a reverse mortgage.
Many mortgage companies and lending banks offer reverse mortgages, so the range of providers can seem overwhelming. Using tools such as Consumer Affairs' review comparison listing can help narrow the field by allowing you to see the top rated companies and compare their features and reviews on a single page. However, this is only a first step. Finding the right lender for you requires more investigation.
Check the Lender's Compliance With Government Regulation and Advice
A reputable lender must ensure that all applicants for reverse mortgages have loan counseling with an HUD-approved counselor, whether by providing this or insisting on it as a condition for an application. Many of the better lenders also offer tailoring services to ensure that the loans specifically meet your needs, but this is not the same process as loan counselling. The counsellor and the lender should warn you of the possible downsides of taking a reverse mortgage, which can include loss of access to Medicaid and damage to your credit rating.
A good lender will also be able to demonstrate how the loan amount you qualify for depends on the market value of your home, your age and tailoring of the loan. Better equity obviously means that more money is available, but your age will make a big difference.
Check Out the Customer Service and Paperwork
Ask questions throughout the process to find out if the lender is right for you. Remember that the responsibility for repaying the loan will fall on your inheritors at what is likely to be a hard time, after your death. Note how empathetic and helpful the staff members are to other customers if possible. This will give you an idea of how your relatives or friends may be treated. Smaller banks may be both more sympathetic and more likely to offer loans to those rejected by larger institutions.
Make sure that you read all of the paperwork before committing to the loan, or get a financial adviser to go through it with you. A good company's terms should be upfront and clear, setting out both your rights and responsibilities under the agreement along with its commitment and expectations. If any of these things are not clear, check with the company. If no explanation is forthcoming, or if you feel the term is unfair, look elsewhere for your loan.
A reverse mortgage is a specialist loan secured on property, and as such, the basic rules for finding the right lender are similar to those for any loan. However, because of the nature of the delayed repayment for these loans, which will likely devolve to your inheritors, it's even more important to make sure that you create a good working relationship with the lender and that it is a reliable company with good customer support.