Shopping for a Reverse Mortgage: Choose the Right Loan

Choose the Reverse Mortgage that Meets Your Needs

1. Single Purpose Reverse Mortgages

Reverse mortgages are specialty refinance home loans that come in many forms. If you have a low-to-moderate income and need money to pay property taxes, or to maintain, repair, or improve your home, you may qualify for a single-purpose reverse mortgage. You can generally apply through state and local governments as well as through community organizations. They carry very low rates, and require low or no fees. Area Agencies on Aging (AAAs) can tell you if you qualify for available programs. Call 1-800-677-1116 for information.

2. Home Equity Conversion Mortgages (HECMs)

You may choose a federally-insured Home Equity Conversion Mortgage (HECM). Fees on these loans are limited by HUD and are therefore lower than fees on many other loan programs. However, your loan amount may be limited to less than you'd like if you have an expensive home.

3. Jumbo Reverse Mortgages

Jumbo reverse mortgages are offered by private lenders. You may be able to get more money but will probably have to pay more fees. Because rates and fees can vary on these mortgages, it is most important to shop with several lenders and compare before committing.

Once you have selected your mortgage, understand your disclosures before making a final decision. In addition to the disclosure forms you get with a normal loan, federal law requires your lender to provide you with some special forms for reverse mortgages. The most important is called a TALC, or Total Annual Loan Cost disclosure. Unlike a normal mortgage, the term of a reverse mortgage is unknown, and the cost to you depends on, among other things, how long you hold the loan. The TALC form is designed to show what the loan will cost you over time. The percentage rates are presented in an easy-to-read table. Get a few from different lenders and compare. The lowest TALC rate for the time you expect to keep the home is probably the best deal for you.