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Understanding Reverse Mortgage Loans

A reverse mortgage loan can be highly beneficial for the financial security of qualified seniors with sufficient equity in their homes. The funds from a reverse mortgage can be used to supplement retirement income, pay off an existing mortgage or other debts, cover medical care, prescriptions, and in-home assistance, make home improvements, or simply save for a rainy day.

Since not all reverse mortgage companies offer the same level of service, it's important to choose your lender carefully and explore all available options.

Check Reverse Mortgage Rates and Costs

While the Mortgage Insurance Premium (MIP) is standardized across all lenders due to HECM program guidelines, other costs—such as origination fees, interest rates, closing costs, and servicing fees—can vary.

Side-by-side comparisons may help you save money. Reverse mortgage counselors can provide this information and answer any questions you may have.

Know the Total Annual Loan Cost (TALC) Rates

Understanding the requirements needed to prevent the reverse mortgage loan from becoming due is essential. Counselors and lenders can explain the Total Annual Loan Cost (TALC), which outlines the estimated annual cost of the loan.

Understand Your Loan Options

If you plan to use reverse mortgage proceeds for home repairs or improvements, contact your local Area Agency on Aging to see if you qualify for additional assistance, such as home repair loans or help with property taxes. Visit www.eldercare.gov for more information.

The Federal Housing Administration (FHA) maintains an updated list of FHA-approved reverse mortgage lenders. Beyond cost and loan value, selecting a lender that upholds high professional standards can make the lending process smoother and more reliable.

A strong rating with the Better Business Bureau and membership in the National Reverse Mortgage Lenders Association (NRMLA) are good indicators of a reputable lender. NRMLA members must adhere to a strict code of ethics, including fairness, confidentiality, integrity, competence, diligence, and professionalism.

For more information about reverse mortgage loans and to explore which loan option may be right for you, request our free Reverse Mortgage Handbook or use our reverse loan calculator to see how you may qualify.