How to Get the Most Money for a Reverse Mortgage

by Bradley James Bryant

Overview

If you are 62 or older you are eligible for a reverse mortgage. This is a mortgage product which allows you to convert the equity in your home to cash which can be used to supplement retirement income, pay for your current mortgage, or supplement retirement. You are not obligated to sell your home or pay a monthly fee for the product, however, there are a few things to be mindful of.

Step 1

Understand the three different types of reverse mortgages. They are single purpose (least expensive and can only be used for one purpose [repairs or improvements] which is specified by the government or lender), federally insured, and proprietary (most expensive and flexible, with high upfront costs and no income or medical requirements).
Step 2

Meet with a counselor from an independent government agency. The counselor can explain all the costs associated with the loan as well as your alternatives.
Step 3

Ask the counselor about payment options, fees and other costs which affect the total cost of the loan. To find a counselor, visit www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm or call 800-569-4287. The average cost to see a counselor is $125, but if you do not have the fee (and can prove it), you will not be turned away.
Step 4

Determine the amount you can borrow. The amount you borrow depends on your age, type of reverse mortgage, appraised value, and current interest rates. In general, the older you are and the more equity you have, the more money you can get.
Step 5

Shop around and compare options with various lenders. If you only want to make home improvements or repairs you may qualify for a low cost single purpose loan which is cheaper. Contact your local Area Agency on Aging (AAA) or the AARP for information.