Every day, I sit across from couples or individuals that are considering applying for a reverse mortgage. The stories vary, of course, but at the core they want to feel financially prepared for the next chapter in their lives.
Most people have misconceptions, and I can see in their eyes, at least initially, a lack of trust that has to be earned, and most of the earning of that trust is done by listening, and learning about what’s important to them. The misconceptions are a matter of explaining the reverse product and how it works for them and ther heirs in the future.
Reverse mortgages are HUD/FHA products, and that brings a levelDepartment of stability, and information available to the potential borrower. HUD (the U.S. Housing & Urban Development) requires borrowers to attend independent third-party counseling after the receipt of a reverse mortgage proposal from a lender. The proposal contains a comparison of different reverse mortgage options, an estimate of fees, amortization schedule, loan cost over time table, and HUD’s official booklet “Use Your Home to Stay at Home.”
As we grow older, we face decisions about aging, and how to navigate our economic and health changes. Will we be able to stay in our homes, and if so, how do we pay for the changes we are facing? The National Council on Aging (NCOA) is committed to helping us understand available options, and resources, both public and private. The mission statement of NCOA is to improve the lives of millions of older adults, especially those who are struggling. Through innovative community programs and services, online help, and advocacy, NCOA is partnering with nonprofit organizations, government, and business to improve the health and economic security of 10 million older adults by 2020. Learn more at ncoa.org.
Another important piece is talking with your family. If leaving a large portion of your home’s equity to your heirs is important to you, a reverse mortgage is probably not a good choice. Reverse mortgages get bigger over time; interest is still being charged even though you are not making a principal and interest payment, and FHA mortgage insurance is accruing. You don’t know when you will pass away, sell the house, or move out permanently, and you may not have the equity you’d like to leave to your heirs left in your home.
Also, living at home has it’s own set of challenges as we age. Options have changed with the availability of reverse mortgages; others may allow you to “age in place.” There are many factors to consider, so take advantage of the financial and home health-care professionals that may help guide you.
Government programs may also play an important part in your decisions. Do your own research, and reach out to groups that specialize in helping seniors. There are a lot of great organizations and people that are ready and willing to help you. Just ask!
Dirk Gray is a reverse-mortgage specialist with Frost Mortgage. He teaches for the New Mexico Real Estate Commission and First American Title. Contact him at 505-930-1953 or firstname.lastname@example.org.