Please advise on the best source for reverse mortgages. What is your opinion of AAG? Thank you.
SAVAGE SAYS: Well, first let me say that I highly endorse the concept of Reverse Mortgages — for the right situation and done with the right lender. In fact, I arranged a RM for my father (now 92) at least 15 year ago. I keep telling him to enjoy his condo along the ocean, because they never expected he would live so long, so he’s beating the lender out of a lot of money every day he stays in his home! That, of course, is the plus side of a Reverse Mortgage — as long as you live there, you can never “run out” of money! (And you can take the money on a monthly basis, or in a lump sum — with interest accruing to the balance — which doesn’t impact you, just the value of anything “left over” for your heirs!)
So the first step is an analysis of how long you plan to live there. If you can’t imagine being in your home for at least 5-10 years (and that means paying the taxes, insurance, and any upkeep, as well as being healthy enough to handle living there), then it isn’t worth it to do a reverse mortgage.
ALL Reverse Mortgages require independent counseling, so you understand the terms, the fees, and all aspects. I suggest you go to www.ReverseMortgage.org, the industry website, where you can learn absolutely everything you need to know about Reverse Mortgages. There’s even a place to ask questions and get answers.
As to specific recommendations of firms, I don’t do that. But you should know that if you are getting a FHA (ie, government insured, which insures the BANKS against loss if, like my dad, you live “too long” ) and if it is a standard HECM (Home Equity Conversion Loan) then the only difference is the FEES that are charged for this service. That’s what pays for these television commercials! That’s why you’ll want to look for the lower-cost HECM-SAVER loan, (smaller up-front fees). The other variable is the “origination fee” which has a max of 2% of the initial $200,000 of the home’s value and 1% of the remaining value, with a cap of $6,000. But many RM lenders actually waive this fee, in part or entirely, which is why it’s important to compare deals.
Appraisal fees, title search, documentation and registration fees, and other add-ons can also add to the total one-timecosts. And of course, there’s the interest rate being charged. ?Since you aren’t actually paying the interest on this payout until the home is sold when you move or die, the only impact is on the balance that will be left for you or your heirs when the home is sold.
To avoid paying higher fees than necessary, ask at least two companies to tell you the total cost of the loan on your property. That’s how to compare, and they are obligated —before you sign up — to give you this Total Annual Loan Cost (TALC) Disclosure, before you sign up for anything!
And not only are you required to have independent counseling (AARP and Consumer Credit Counseling Services offer certified counseling) but you should also get an attorney who is familiar with Reverse Mortgages.
Final word: I put my own dad in this position, and I’m glad I did. It has given him the independence of knowing that his investment in his home is now paying back to him. My brothers and I would have supported him anyway, but this leaves him his pride — and a very nice place to live!? It’s worked for nearly 15 years. There won’t be any equity left when he passes on, but we weren’t looking for that.
So do your homework — be sure to go to www.ReverseMortgage.org and then proceed carefully. Under the right circumstances, a RM can be a lifesaver!