Kevin Michael Melody
Gather Knowledge Before Seeking Advice
In today's hyper-vigilant Internet/Social Media society, even your own mobile phone is trying to sell you something. All it takes is the casual mention of your interest in a product or service or a single Internet search on your phone for the pop-ups, texts and even phone calls to begin. All you wanted was a little information and now you're being inundated by ads and hounded by relentless sales people. Well if information about reverse mortgages is what you seek, here are here are three tips to help you with your research, which will NOT subject you to more unsolicited calls from pushy salespeople or require you to provide any personal information:
1.) Lenders and financial advisors are paid to be biased, the former towards a reverse mortgage and the latter towards anything else.
If you don’t yet know whether a reverse mortgage is right for you, most lenders will try to convince you it is, and most financial advisors will advise you it is not. Ultimately, you will have to make the decision on your own and it is better to first arm yourself with as much knowledge as possible before you start seeking advice from others. The best place to start is at the source, which is the Department of Housing and Urban Development (HUD). The official publication on reverse mortgages is titled Using Your Home to Stay at Home and you can download a copy at this link: https://www.ncoa.org/economic-security/home-equity/housing-options/use-your-home-to-stay-at-home/
2.) HUD-Certified Counselors are paid to be neutral.
HUD is concerned with the welfare of seniors and has regulations in place to protect HECM borrowers from predatory lenders. Among those safeguards is the requirement that all prospective borrowers attend a debt-counseling session conducted by a certified reverse mortgage counselor and obtain a certificate of completion before any lender may accept their application. These counselors are paid to give you a neutral, unbiased overview of the program and its alternatives as well as to certify that you are eligible and that you understand how the program works. Starting by obtaining a counseling certificate has many advantages, the most important of which are:
You will be able to compare what you learn from your counselor with what is being told to you by lenders and financial advisors, and in so doing you’ll be better able to determine the character, competence and intentions of the professionals you do speak with.
Interest rates and loan closing costs have a direct bearing on the maximum HECM loan amount a lender can offer. The lower the rate and costs, the more money that will be available for you. So, it pays to shop around. However, no quote is worth the paper it’s written on until you actually sign an application with a particular lender, and you won’t be allowed to apply until you have a counseling certificate in hand. So, getting this done in advance will give you the advantage of being able to act immediately on the best quote before market conditions change.
To find a HUD-certified reverse mortgage counselor go to this link: https://entp.hud.gov/idapp/html/hecm_agency_look.cfm
Counselors charge a fee for their service, and lenders are prohibited from paying this fee on your behalf. However, there is grant money available. Follow this link to apply for a grant: https://www.reverserescue.org/how-it-works
3.) Specific knowledge, experience and competence count.
Reading the HUD publication and obtaining a counseling certificate are the best first steps in preparing yourself to make the decision as to whether or not to seek a reverse mortgage, but because a HECM is a unique and somewhat complex type of mortgage, it takes more than a general understanding and an unbiased overview to really know if it is right for you. That is where an honest, ethical, knowledgeable and competent loan professional who specializes in the HECM loan program is indispensable and once you take those first two steps, you’ll be much better equipped to find and identify the right person to help you with this important decision.
Lastly, despite the lack of knowledge regarding reverse mortgages on the part of most financial advisors, there are a few that have spent considerable time researching the program in order to better advise their clients. One of these is Wade Pfau, who has actually written a book on the subject. Wade is not a lender and will not make any money based on your decision to obtain a reverse mortgage. This link will take you to an very informative article written by Mr. Pfau: Using Reverse Mortgages In A Responsible retirement income Plan.