Taking Care of Mom and Dad: Questions to Ask Reverse Mortgage Lenders
The following questions can act as a checklist to help your parents differentiate among the different reverse mortgage lenders.
- What's the specific financial benefit or benefits?
- What does it cost me? What's the loan origination fee? What's the monthly servicing fee? What are the closing costs?
- Will you provide the total annual loan cost (TALC) disclosure?
- What are the payment options?
- Does an annuity need to be purchased?
- Does the loan require repayment after a certain number of years? (A loan with this feature should be avoided.)
- Will I have to pay, from the proceeds of the loan, any outside fees for consulting or financial planning?
- Are you an approved FHA lender? Approved FNMA (Fannie Mae) lender?
- Are you a licensed lender?
Getting a reverse mortgage may not solve all of your parents' cash flow problems. But it's often a good start. You and your parents should research their options to determine whether a reverse mortgage is right for them. And you may need to ask your parents' tax attorney or CPA if there are any options available to your parents that can generate tax-free cash flows for your parents more effectively than a reverse mortgage.
If nothing else, a reverse mortgage is a good standard against which to measure other investment options.
It's also important to find the right reverse mortgage. Some good background material can be found at the Web site www.reverse.org or on the AARP's primer at www.aarp.org/reversemort Web site. You can also find out more information by contacting a lender, HUD, Fannie Mae or the National Center for Home Equity Conversion.
