05 Dec I’m a homeowner. How do I shop for a reverse mortgage?
Q. How do I shop for a reverse mortgage?
A. A reverse mortgage is something some seniors consider, thinking it will help them stay in their homes.
It’s a big financial decision, often replete with expenses that homeowners aren’t expecting.
So before you act, you should make sure a reverse mortgage would meet your needs.
A reverse mortgage is a loan, in the sense that it allows an eligible homeowner to borrow money, said Evan Drury, a chartered financial consultant with U.S. Financial Services in Fairfield.
He said if a homeowner is 62 or older with sizable home equity, they may be able to borrow against the value of their home and receive funds in a lump sum, as monthly payments or as a line of credit.
“The proceeds that you’ll receive from a reverse mortgage will depend on the lender and your payment plan,” he said. “However, you can’t borrow 100% of what your home is worth.”
It’s important to know that the loan becomes due and payable when the borrower dies, moves out permanently or sells the home, Drury said.
He said federal regulations require lenders to structure the transaction so that the loan amount won’t exceed the home’s value.
“If the loan still does exceed the home value through a drop in the home’s market value or if the borrower lives longer than expected, the borrower or borrower’s estate won’t be held responsible for paying the lender the difference thanks to the program’s mortgage insurance,” he said.
Drury recommends that in searching for a reverse mortgage, like any other financial product, you can start with your trusted bank, or talk to friends and family who have used reverse mortgages. You can also search online for reverse mortgage lender rankings.
It’s going to take a fair amount of research, but once you find a lender, consider consulting with a financial advisor who can go over the details of the loan with you to make sure it will meet your needs.
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This story was originally published on Dec. 5, 2022.
NJMoneyHelp.com presents certain general financial planning principles and advice, but should never be viewed as a substitute for obtaining advice from a personal professional advisor who understands your unique individual circumstances.