Getting a reverse mortgage is a big decision, so it’s important to do your research and seek the advice of professionals. A Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, allows seniors to access their home equity without having to make monthly mortgage payments.1 There are several people that can assist you with the process and help you determine if this product is right for you.
If you have children, you may want to involve them in the process. Find out what their expectations are. For example, is inheriting the family home important to them. When a retiree in Gainesville, Georgia met with his six adult children, he discovered that his kids didn’t mind if he got a reverse mortgage. “They were glad we had a place where we are so happy.” Unfortunately, since many seniors have not saved enough for their golden years, they may need to find other ways to supplement their income. Rather than relying on their adult children for financial support, one alternative is tapping into their home equity through a reverse mortgage.2
It’s important to have a legal or financial advisor that you can trust and bounce ideas off of. Reverse mortgages seem to be gaining popularity with financial planners as a retirement tool. Therefore, it’s likely your advisor is already familiar with the product. Talk to him or her about your options for supplementing your retirement income. He/she can help you identify if your strategy is sound or whether there are their some gaps in your plan.2
When getting a HECM loan, all borrowers are required to meet with a Department of Housing and Urban Development (HUD) approved counselor before their application can be processed. The purpose of counseling is to ensure that you have all the information you need to make the right decision for your situation. It can be done by phone or in person and generally lasts about ninety minutes.2
When shopping for a reverse mortgage it’s recommended that you work with a lender who specializes in the product and who is a member of the National Reverse Mortgage Lender’s Association (NRMLA). This is important because NRMLA members are required to follow a strict code of conduct and professional responsibility. Once you choose a lender, make sure your loan officer answers all your questions and takes the time to show you how a HECM will help you meet your goals. A reverse mortgage loan is meant to help you age in place, so you want to be sure a HECM fits your specific situation.2
When applying for a HECM, an appraisal is required by the Federal Housing Administration (FHA) to determine your home’s value and to make sure your home is safe and structurally sound. The appraiser will walk the property, take pictures and then render an opinion of value. Minor defects and cosmetic issues are typically not a concern.2
Once approved, the borrower meets with the title agent to sign and notarize closing documents, just as you would with any loan. Depending on the state’s requirements, this process may take place with an attorney instead of a title agent. Typically this occurs at the borrower’s home or in an office.2
If you’d like to find out if a reverse mortgage is right for you, please use our Reverse Mortgage Calculator or call us at 800.218.1415.
1 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.
2 Here is Who Will Help You in the Reverse Mortgage Loan Process – bankrate.com, by Jill Cornfield, 11/1/16, http://www.bankrate.com/finance/mortgages/who-can-help-with-reverse-mortgage-process-1.aspx?tc=eml.