Best practices & tips:
- Avoid any reverse mortgage company/representative that requires the purchase of another financial product a condition of closing a reverse mortgage loan. A reverse mortgage should be understood on its own as a financial product before any other products/services are added that can complicate the decision process.
- Consider alternatives to a reverse mortgage such as selling the house, renting out a room, etc. There may be very good non-financial reasons to disqualify these options, but it doesn’t hurt to run the numbers on them to make an informed decision.
- Negotiate closing costs and fees where possible. Just like any other mortgage, a reverse mortgage can have many different options that might better suit a particular person’s needs.
The best features of a reverse mortgage are the ability to borrow against a home you continue to live in, without risk to yourself/estate/heirs of owing more than the home is worth at the end of the loan, and without a monthly payment requirement.
That being said, it’s important that borrowers understand they continue to be responsible for paying property taxes (same as if they didn’t do the reverse mortgage) and homeowners insurance (same as if they had any other kind of mortgage).
It’s a great financial tool when used appropriately.