By Alain Valles, CRMP
No other loan product is wrapped in as much mystery and misinformation as a Home Equity Conversion Mortgage (HECM), more commonly known as a “reverse mortgage.”
Unfortunately, this aura has led to a number of seniors making poor home financing decisions. Many senior homeowners who could truly benefit from a reverse mortgage have been discouraged from even looking into one by well-meaning – but misinformed – family and friends. I believe that a senior who receives factual and accurate information will be better able to make the right decision about a reverse mortgage.
Deciding if it makes sense to get a reverse mortgage can feel overwhelming. Like all major decisions, we all strive to make the very best choice. Below are four tips to learning if a reverse mortgage is right for you.
Tip 1. Identify your financial and housing goals
Ask yourself – “If I had a magic wand, what is my ideal scenario if I obtained a reverse mortgage?” Quite often there is an immediate need for more cash each month, pay off a mortgage, get rid of credit card debt, or make home improvements.
Other seniors are in financial balance today but are worried about having enough cash down the road, often fearful that they will outlive their investments, or face an unexpected health crisis.
Find a quiet moment to reflect how you want the next 15 or 25 years and beyond to look like.
Tip 2. Get the facts
Many websites and TV infomercials are just methods to capture your name to be sold as a lead. The National Reverse Mortgage Lenders Association’s website www.reversemortgage.org is an excellent starting point to learn more about reverse mortgages. They have a link for all of its members who abide by the association’s stringent Code of Ethics. Or feel free to contact me to receive the National Council on Aging’s official reverse mortgage consumer 36-page booklet approved by the U.S. Department of Housing and Urban Development called “Use Your Home to Stay at Home.”
Tip 3. Talk with your trusted advisors
All reputable reverse mortgage companies will encourage you to invite your trusted advisors to be a part of the learning process. However, regardless if the advisor is a financial planner, an attorney, or your adult child, very few people understand the pros and cons of obtaining a reverse mortgage. What is recommended is to have the persons you trust talk with the reverse mortgage specialist.
Tip 4. Make a decision
Hoping things will magically get better usually results in more financial pain. Waiting might lead to regret. Sometimes deciding to sell and downside or rent is a better choice. The key is to be proactive and seek accurate information to make the best decision for you.
Alain Valles, CRMP and president of Direct Finance Corp. NMLS 1535, was the first designated Certified Reverse Mortgage Professional in New England. Loan officer license NMLS 7946. He can be reached at 781-724-6221 or by email at [email protected].