Top 5 Tips to help you through a Reverse Mortgage

Tip #1 – Do your homework

There are many ways to help fund your retirement. Before obtaining a reverse mortgage, you should make sure it is the option that will best suit your needs. In addition to the age requirement, there are a few other qualifications to know about.

  • Home requirements. The home you plan to borrow against must be your primary residence and you must have a substantial amount of home equity.
  • Counseling. Reverse mortgage counseling is a mandatory step in getting a Federal Housing Administration-insured reverse mortgage through its Home Equity Conversion Mortgage (HECM) program. You can find out more about the program by visiting the Department of Housing and Urban Development’s website.
  • Taxes and insurance. Reverse mortgage borrowers are required to keep up with property taxes and homeowners insurance as well as home maintenance under the terms of the loan.


Tip #2 – Talk with family

Getting a reverse mortgage is a big decision for the borrower, but it is also one that may impact family members. If you are considering a reverse mortgage, talk with your family and those who might also be affected by the loan, such as any other person who lives in your home.

If the borrower passes away while living in the home, the heirs will be responsible for repaying the loan. The heirs can choose to sell the estate in order to repay the loan, or can keep the home and pay off the loan using other means.

Keep in mind that a reverse mortgage does not require repayment until the borrower moves, sells the home or passes away. As a benefit of a federally-insured reverse mortgage, the borrower will never have to pay back more than the home is worth at the time of repayment.



Tip #3 – Attend Counseling

If you decide to obtain a reverse mortgage loan, you will be required to attend a session with a reverse mortgage counselor.
This session will help in making sure you understand the requirements of a reverse mortgage. A counseling session is also a good time to ask any questions you may have regarding the reverse mortgage or the alternatives that are available. Find a local or by-phone counseling agency in our counseling section.

Tip #4 – Choose the best option

There are three types of HECM loans: The Standard, Saver, and HECM for Purchase.

The standard requires higher fees paid by the borrower, but provides more in proceeds. The HECM Saver is a lower-cost option, but it also offers less in available proceeds. If you are interested in moving into a new home while taking out a reverse mortgage, the HECM Purchase allows borrowers to purchase a home and take out a reverse mortgage in one transaction.

There are also different options for payment plans. You can choose to receive the payment as a lump sum, as tenured payments, term payments, as a line of credit or a combination of the payment types.

Tip #5 – Gather documentation

Keeping track of all loan documents and financial statements will help the reverse mortgage process run more smoothly.

Before attending reverse mortgage counseling, you will receive a packet from your lender or from the counseling agency that will help you prepare for the session. If you have questions about other documents you will need, contact us for more information.


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