Education is vital when it comes to understanding reverse mortgages and to become educated, potential borrowers must ask the right questions. While there are certain parts of the loan process that are self-explanatory, others are more complex and require prospective borrowers to ask certain key questions before moving forward with a reverse mortgage, according to a recent Bankrate article.
Bankrate suggests potential borrowers should ask six questions, which address much of the misinformation about the reverse mortgage product. Arguably the most important question a borrower should ask him or herself before starting the process is “Who am I working with?” the article says.
Borrowers should be shopping around for a company that fits best with their needs. An important designation to look for is if a lender is a member of the National reverse Mortgage Lenders Association (NRMLA), the article points out. Another tip is to check out the lender’s rating with the Better Business Bureau.
Another important question that many people are misinformed about is if they will still own their home if they take out a reverse mortgage.
“Borrowers still have this perception that if you get a reverse mortgage loan the bank is going to own your home,” Paul Fiore, executive vice president of sales for American Advisors Group, said in the article. “And that’s absolutely not true. It’s no different than a traditional mortgage.”
Lenders should explain to borrowers how a reverse mortgage will affect their heirs.
“It’s a complex issue that is affected by whether you have a co-borrower, whether you are married to someone who is not a co-borrower, and whether the last borrower dies while living in the home or moves out permanently before then,” the article states.
Another important point that should be discussed from the beginning with potential borrowers is that a reverse mortgage will not solve all of their issues. Yes, a good loan officer will want to help you solve all of your issues with the loan proceeds, but nothing is guaranteed.
“With these questions, the loan officer and the borrower can discuss whether it’s a good idea to get a reverse mortgage loan, and if so, if now is the time or if it would be better to wait,” the article states. “They can discuss whether to get a fixed-rate or variable-rate loan, and which type of payout would be best: a lump sum, a line of credit, monthly payments or a hybrid of a line of credit and monthly payments.”
Borrowers as well as good lenders should be on the same page when it comes to education about the reverse mortgage product. In the end, as a loan officer, withholding vital information or not answering questions in full can be detrimental to the borrowers experience and future opinion of the product.
View Bankrate’s top questions that consumers should ask when considering a reverse mortgage.
Written by Alana Stramowski