Five Things you Should Know before Taking out a Reverse Mortgage
You have probably learned about the benefits of a reverse mortgage or Home Equity Conversion Mortgage (HECM) for seniors. But before you start looking for a lender, there are things you should be aware of first. These include the following:
Consumer Protections are Required in the Program
Companies that provide home loans including reverse mortgages must operate under the same guidelines. Thus, borrowers who use qualified and approved lenders and get an FHA insured reverse mortgage are guaranteed that their loan has consumer protections.
There are Many Details of the Loan you Need to Understand
Every borrower must understand the loan’s details before they decide to take out a reverse mortgage. It is paramount to consult with somebody they know personally and trust to make sure they get exactly what they want without putting themselves at risk of being scammed. Talking to the person can help borrowers obtain the information they need to know to make educated decisions.
The Right Lender Completes the Transaction on Time
It is recommended to get a reverse mortgage from an established and reputable lender. This takes doing one’s homework. Fortunately, the internet provides consumers the ability to search for lenders and investigate their reliability based on the reviews of their previous customers. A lender that has been operating their business for years has the knowledge and expertise to make the loan easy to understand the process easy. They should have the resources to complete your transaction in a timely manner.
There are No Hidden Fees and Costs
All costs associated with a reverse mortgage should be disclosed to you. Any recurring fees and upfront fees over the loan’s life will be added to the last payoff. In case a borrower wants to pay the loan partially or fully, they can do so without a penalty.
You can Decide How Much Equity to Draw
With a reverse mortgage, you can access a part of your home’s equity. You will make a decision on the amount you want to draw and the lender evaluates the interest only against the amount you draw. The funds that you did not draw will still be your home’s equity. When drawing funds, you don’t pay for the equity or interest every month. In case you decide to sell your house, the amount you drew plus the interest will be deducted from the proceeds of the sale and you can get the remaining profits from the sale.