Considerations When Applying for a Reverse Mortgage
For many seniors, a reverse mortgage provides much needed financial security. According to research, 15 percent of Americans have no retirement savings at all.
Most retirees are on fixed incomes, and if major unforeseen costs materialize – whether they be medical, home improvements or maintenance, or long-term or assisted living care – it could lead to a financial hardship. But a reverse mortgage isn’t always need-based. A reverse mortgage loan could be a financial retirement tool that helps borrowers bridge the gap so they don’t have to tap into their savings or investments right away. No matter your reason for applying for a reverse mortgage, here are some important tips.
Do your homework
As with any loan type, if you are considering a reverse mortgage, do your homework before you ever start the process or contact a lender. Taking out a reverse mortgage is a big step, so learn all you can upfront about the different reverse mortgage programs that are available: single-purpose reverse mortgage, proprietary reverse mortgage, or the FHA-insured home equity conversion mortgage.
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Know the fees
A reverse mortgage borrower must be able to pay the costs and fees associated with a reverse mortgage application and closing, including a loan origination fee, servicing fee, upfront mortgage insurance premium fee, annual mortgage insurance premium fee, and third-party fees. Third-party fees may include: appraisal, survey, inspection, and recording fees, to name a few.
Put together a list of questions and concerns
A reverse mortgage is a big decision, and one that shouldn’t be made spur-of-the-moment. As you do your initial research, ask yourself these questions:
- Do I understand what my obligations as a borrower of a reverse mortgage are?
- Will my spouse be a co-borrower? How will a reverse mortgage affect my spouse?
- How will I repay the reverse mortgage loan?
- Will a reverse mortgage loan affect my social security or Medicaid?
- How long do my spouse and I plan to remain the home?
- Do I have any other ways to supplement my retirement income other than a reverse mortgage?
- How will a reverse mortgage affect my heirs?
Contact a Certified Reverse Mortgage Professional to get the Answers
Still not sure if a reverse mortgage is right for you? The next step is to speak with a Certified Reverse Mortgage Professional, or CRMP. A CRMP is an industry expert who demonstrates knowledge and competency in the area of reverse mortgage lending, and a dedication to uphold high standards of ethical and professional behavior. You can visit the National Reverse Mortgage Lenders Association (NRMLA) website to get a deeper understanding.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.