4) Do your research and shop around before committing to a reverse mortgage. To understand the potential pros and cons of a reverse mortgage, talk to financial advisors and qualified housing counselors. Depending on your circumstances, there may be other, less expensive options available to you. Explore different kinds of loans (including a mortgage refinancing, a home equity loan and a home improvement loan) and programs from local government agencies or nonprofit organizations. In some cases, it may even make financial sense to sell your home and downsize to a less expensive home or even a rental. If you decide that borrowing money is the way to go, contact several lenders and compare the costs and benefits of the options they offer. ”Most financial experts also agree that it is never a good idea to use the funds from a reverse mortgage to purchase other financial products or services,” added David Lafleur, an FDIC Senior Examination Specialist. “Not only will you immediately incur expensive interest charges and other fees in connection with the reverse mortgage, but having large deposits or annuities may make it tougher for you to qualify for certain entitlement programs that take assets into consideration, such as Medicaid. Also, if you tie up money in CDs or annuities, you will be giving up easy access to funds you may need to meet your expenses.”
Additional information and guidance on reverse mortgages is available from HUD at www.hud.gov/offices/hsg/sfh/hecm/rmtopten.cfm or by calling 1-800-569-4287. Note: To receive an FHA-insured reverse mortgage, you must first speak with a HUD-approved counselor, who can provide you with information on this product and other alternatives so you can determine what is suitable for you.
SOURCE: Federal Deposit Insurance Corporation (FDIC), FDIC Consumer News