Questions That You Should Ask Your Reverse Mortgage Lender

Chances are you'll have never met a reverse mortgage lender before but you'll be placing your home and your future happiness in their hands. Even before you go and visit them you should have done your research and have a list of questions to put to them. A lack of preparation or forethought on your part could jeopardize your retirement plans, your wealth and your happiness.

A reverse mortgage can be a great way for seniors to unlock the wealth stored as equity in their homes, giving them extra income or funds to use in any way they want. However, this type of mortgage is a complex financial product and needs to be fully understood in order to select the program that'll work best. Therefore, don't be reticent about asking questions, and don't make any decision to proceed until you're entirely satisfied that you know what you're about to undertake.

Assuming you qualify, here are some of the more important questions you should ask your reverse mortgage lender.

1. Why are they selling you one particular program and not another? Remember, there are three main types available; HECM (government insured), Home Keeper (FannieMae administered) and proprietary (often called jumbo because there is no limit on the amount that can be borrowed). Each has advantages and disadvantages. It's important that you get the right program. Some, lenders might be 'upselling' a product over another one simply because they make more money on the deal and not because it's in your best interests.

2. Ask exactly how much you can borrow, the start up and closing costs (these can be considerable), how much equity will be left in your home after 5, 10, 15, 20 years etc (the originator - the broker - should be able to give you these figures. What are the annual set-aside charges?

3. Are there any penalties or charges for early repayment of the loan? Also, ask about refinancing and what charges would be incurred if you decide to borrow more in say 5 or 10 years time, assuming your home's value increases over this period.

4. If there is more than one borrower, ask about what happens when one dies; will the loan be immediately payable. Does it matter if the borrowers are married or not? What happens if one of the borrowers moves out?

5. What happens if the borrower has to go to a nursing home? Will the loan become payable because the borrower is not living in the home?

6. What obligations does the borrower have after getting the loan? Ask about house insurance, maintenance etc. and how these might invalidate the loan agreement.

7. What professional body does the lender belong to? Do they belong to the National Reverse Mortgage Lenders Association (NRMLA) or a state governed organization?

8. How can you receive the money: monthly payments, line of credit lump sum or a mixture of these? And, are there any charges if you decide to switch payment type?

The above are some of the more salient points; however, you should try to draw up a list of as many detailed questions as possible. By submitting detailed questions, and by receiving detailed answers, can you feel comfortable with the program being offered by your reverse mortgage lender and, more importantly, that you get the best program for your specific requirements.

By: Robin OBrien

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