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Thursday, August 7, 2014

Questions to Ask Before Obtaining a Reverse Mortgage

A reverse mortgage is a type of loan that allows senior citizens to withdraw equity from their homes while living in that home. Payments are not expected to be made on that loan. Rather, the loan will be repaid in full when the borrower or borrowers no longer use the home as their primary residence and the home is sold.

Before obtaining a reverse mortgage ask yourself these questions:
  1. What are the fees associated with this mortgage?
    Fees vary from lender to lender so it’s important to shop around and compare pricing. Most borrowers opt to add those fees into their closing costs and interest will be charged on those fees. In addition to interest and a servicing fee, expect to pay a reverse mortgage insurance premium.
  2. Is this mortgage right for me right now?
    The younger you are when you take out the loan, the larger the balance will be over time. This means that as you age, you’ll have less home equity to tap in the event of an expensive emergency.
  3. Can I lose my home if I have a reverse mortgage?
    Failure to pay your property taxes, insurance premiums, and maintain the home can all result in potentially losing the home if the loan is called due or the house is foreclosed upon.
  4. Have I talked to HUD certified counselor?
    Talk to a housing counselor who’s been approved by the Department of Housing and Urban Development (HUD) and discuss your situation. Find a HUD counselor near you or call HUD’s housing counselor referral line (800) 569-4287.
While a reverse mortgage can be a useful retirement planning tool, they’re not always the answer for a senior borrower. Do your research and talk to a housing counselor who can help you with your decision.
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