Choosing a reverse mortgage lender can be difficult. With so many options, it can be hard to tell which reverse mortgage lender is offering you the best deal. To help you sort through all of your offers, we have created a list of the questions you should ask each reverse mortgage lender you are considering.
1. How Much Money Will I Receive? Each reverse mortgage lender will have a different answer. The reverse mortgage lender who offers you the most money is the better deal because that reverse mortgage lender is charging you the least amount to borrow the money (Lawson 90). For example, a reverse mortgage lender who offers you $80,000 is a better deal than a reverse mortgage lender who offers you $78,000. That is because the reverse mortgage lender who offers you $78,000 is charging you $2,000 extra to borrow the money. However, be careful. Some reverse mortgage lenders will offer you more money initially because they do not include all costs they expect you to pay, such as your home's appraisal, into their bid (Lawson 90).
2. How Much Will I Owe You, the Reverse Mortgage Lender, when My Reverse Mortgage is Due? Other than repaying the money your reverse mortgage lender lends you, you will also have additional fees to pay. Therefore, it is important to ask what those fees are when comparing different reverse mortgage lenders. Some of the fees you should ask about are loan origination fees, monthly servicing fees, closing costs and outside fees for consulting or financial planning (Rust 229).
3. What is the Total Annual Loan Cost, also known as the TALC? Your TALC is a great way to compare reverse mortgages. Each reverse mortgage lender you work with is required by federal law to tell you what your reverse mortgage TALC is (Driscoll 61). Your TALC, which is expressed as an interest rate, is an estimate of how much your reverse mortgage will cost each year (Lerner 234). The longer you have your reverse mortgage, the lower your TALC will be (Patti 145). Therefore, your reverse mortgage lender will give you a TALC for different terms lengths: two years after receiving your reverse mortgage, when you are expected to die and some point after you are expected to die (Lerner 234). Keep in mind that your TALC is not entirely accurate because your reverse mortgage lender does not know how long you will live and interest rates can change (Patti 145).
4. How Much Will I Have Left to Give to My Heirs? It is important to know how much home equity you will have left after repaying your mortgage, so that you have an idea of how much money you will be leaving your heirs (Lawson 89). In the ideal world, you would be able to borrow tons of money from your reverse mortgage and still have tons to give to your heirs. However, it does not work that way. The best you can do is find a reverse mortgage lender who offers you the amount of money you want to borrow and charges cheap fees. That way you have more of a chance of having equity left in your home to give to your heirs.
5. Are You an FHA Approved Reverse Mortgage Lender? You will want to know if your reverse mortgage lender is FHA approved if you are looking for a Home Equity Conversion Mortgage (HECM) because you can only get an HECM reverse mortgage from a FHA approved reverse mortgage lender ("About Reverse Mortgages for Seniors - Section 255 - Home Equity Conversion Mortgages (HECM)").
The rest of our Reverse Mortgage Guide:
