A Few Things to Note When Considering a Reverse Mortgage
Typically, the fees associated with a Reverse Mortgage can be quite high. Borrowers are required to pay an origination fee (typically capped at $6,000), upfront insurance premium, MIP’s, loan servicing fee, and interest rates. These fees are predominantly paid out through the money you borrow. Essentially meaning the fees and interest are taken out of your home equity.
Another note to remember is that the reverse mortgage needs to be taken out against your principal residence which is the place in which you reside primarily during the first year. Complications may arise if only one spouse has their name listed as a borrower. In this circumstance, the spouse may be required to move out of the residence and pay back the debt. To avoid this, make sure to add your spouse as a co-borrower or if eligible, claim them as a non-borrowing spouse.
A couple of things also worth taking into consideration is the cost of property tax and homeowners insurance. It is essential that borrowers remain up to date on these costs to ensure fair market price.
You Have a Right to Cancel
Fortunately, many borrowers have the right to “rescission”, or cancel, should they change their mind about taking out a reverse mortgage. As long as they notify their lender three business days after closing a deal. To cancel, a borrower must have in writing on any day except Sunday or a national holiday that they would like to cancel their reverse mortgage. When sending out the letter, make sure you get a return receipt to document when and what the lender received. Make sure you keep copies of any documents for future reference.
Always Report Possible Fraud If Possible
It is essential to report any potential fraudulent activities if you come across them. Make sure to report it at the Federal Trade Commission at ReportFraud.ftc.gov
Additional Resources for information
Consumer Financial Protection Bureau 1-855-411-CFPB (1-855-411-2372)
U.S Department of Housing and Urban Development’s Federal Housing Administration Resource Center 1-800-CALL-FHA (1-800-225-5342)
AARP Foundation
Sources:
https://www.investopedia.com/five-things-before-getting-reverse-mortgage-5223720
https://consumer.ftc.gov/articles/reverse-mortgages
