Deciding

Is a reverse mortgage right for you?

Many homeowners use the funds to supplement Social Security or other retirement income, meet medical expenses, pay for in-home care, or make home improvements. And there are flexible ways to receive the money: a lump sum, a monthly payment, a line of credit, or a combination.

If the home appreciates and becomes worth more than the loan balance, you or your heirs receive the difference. The opposite can pose a problem: if the balance exceeds the home’s value, your heirs may need to hand ownership back to the lender rather than keep it.

Think about who else lives there

There are real complications involving other people who live in the home with the borrower, and what happens to them if the borrower dies. Family members who will inherit the property should pay close attention to what is required to manage the loan balance at that point.

There are provisions that let the family take possession of the home in those situations, but they must pay off the loan with their own money or qualify for a mortgage that covers what is owed.

A word on sales pressure

Not all reverse mortgage lenders use high-pressure tactics, but some do. Get guidance from a nonprofit agency that offers reverse mortgage counseling before signing a loan agreement. Taking advice from a celebrity spokesperson or a salesperson, without checking the facts against a trusted independent source, can leave you with a major financial commitment that does not suit your circumstances.

Questions worth sitting with

These are the questions we ask in a first meeting. You do not need answers before you call, but they are the right things to be thinking about.

• What are my retirement goals, and how close am I to reaching them?
• Is my home meeting my needs?
• How long can I realistically live in my home?
• Do I want to leave my home to my children? Do they want that?
• Would an unexpected expense take me off track?
• Am I still working just for the money? Is that how I want to spend my time?
• Where will I be in five years? Where do I want to be?
• What excites me about life, and am I doing enough of it?
• What dreams are left to chase, and what is holding me back?

Proprietary reverse mortgages

HECM loans account for more than 90 percent of all reverse mortgages in the United States, but there is a growing market for proprietary reverse mortgages, privately insured by the companies that offer them.

These generally carry higher loan limits and allow greater flexibility on property types. They also come with many of the same consumer protections as the HECM program, including mandatory counseling. If your home is worth substantially more than the FHA lending limit, ask us whether a proprietary product makes more sense for you.