Reverse mortgages are a great government insured loan for seniors 62 and older that allows the borrower to take equity out of their home as tax free cash for anything they desire all without having to make a mortgage payment as long as they occupy the property. They can be the perfect tool to create a wonderful retirement and make the golden years just that but there are several things to consider and look out for. We’ll discuss what those things are but the best way to make sure you’re doing what’s best for you is to ask as many questions as possible while attending the mandatory government sponsored counseling. After that, make sure you use a reputable reverse mortgage lender and look up your loan officer on the NMLS consumer site to make sure they are active and able to sell the loan. After that you need to just ask lots of questions and trust your feelings. If something seems off, it just might be. As I said before, the counseling session is so important because the counselor is not trying to sell you the loan and has nothing to gain regardless of if you do the loan or not so they will tell you what’s good and what’s bad.
One of the main things to look out for is a reverse mortgage loan officer trying to steer you into a certain type of reverse. Most reverse loan officers get paid based on the cash out amount and certain reverse loans like the fixed rate require a full draw. Some loan officers will try and sell you a fixed even if you don’t want or need it just so they can line their own pockets. It’s important to explain exactly what you are trying to accomplish with the reverse, if you don’t like the attitude or answers the loan officer is giving you then call another one. One of the best parts about the FHA HECM (government insured reverse) is that it’s the same loan no matter where you go as far as safety of the products etc, the only difference is the fees can be charged by one lender versus another. So really you need to again take advantage of the counseling. Ask the counselor about the different types of reverse mortgages and see which one best suits your needs. If a loan officer tries to talk you out of the one you want be wary.
Another thing to look out for is a reverse mortgage loan officer trying to sell you on other investments like an annuity for example or trying to push a financial planner of theirs on you. Reverse mortgage lenders are very careful in making sure that loan officers are not only trying to sell insurance or investments like annuities because it is illegal but also because a reverse mortgage can be structured like an annuity so there is no need to waste additional money purchasing one. You can buy an annuity if you want but the loan officer cannot sell you one or be referring you to someone who will be selling you one to their knowledge. It is important to remember this because there are insurance agents and financial planners who will offer the reverse mortgage loan officer incentives to sell you or steer you to them. While most loan officers are honest will not attempt this there are some like in any other industry that will. If a reverse mortgage loan officer tries to sell you on any form of insurance or investments it is important to report them to their company as well as HUD.
A reverse mortgage is a great safe loan and can be the best decision you ever make. Just make sure to take advantage of the counseling and most times go with your gut. Never allow a loan officer to steer you into a loan you don’t want and make sure they understand that you are the one making the decisions and not them. Never deal with a reverse mortgage loan officer that is trying to sell you investments, insurance or anything other than the loan itself. Remember, it’s important to report those loan officers so others don’t get taken advantage of. As I said before, reverse mortgages are very safe and 99% of loan officers are good people that just want what’s best for you. The other 1% are what you need to look out for and they could be selling reverse mortgages or anything else. Lastly, involve family and friends or trusted advisors. Having others help in the decision making can be helpful.