Personal referrals from financial advisors, friends or family, speaking with more than one lender and knowing what red flags to look out for can all be key elements to help a potential borrower find a quality reverse mortgage lender to help them plan out their financial future in retirement.
This is according to Dr. Wade Pfau, professor of retirement income at the American College of Financial Services, in a piece at Forbes.
Personal referrals and professional guidance
Finding a reverse mortgage lender can be a difficult process, particularly for someone who’s not sure exactly what they should be looking for, Pfau says.
“This is not necessarily easy for those beginning the process with little more to rely on than an Internet search engine,” he says. “A starting point may be with personal referrals from your financial advisor, or from friends or family who have felt satisfied with their lenders.”
It’s also important to speak with more than one potential lender, to make sure that a borrower is sufficiently exploring the options available to them.
“It is important to speak with a few different lenders and to get a sense of the range of possibilities with regard to reverse-mortgage options in terms of up-front costs, the lender’s margin, and ongoing costs, and whether the lender can serve as a resource to address any servicing issues after the loan is initiated,” he says.
Because upfront costs can vary depending on how a borrower intends to use their loan proceeds, simply finding whoever is offering the lowest upfront costs should not necessarily be the most primary concern, Pfau advises.
“It is important to consider more than just who offers the lowest up-front costs,” Pfau says, “because having a personal connection to the lender can be important for any subsequent servicing issues or questions, and because the interaction of up-front costs and the lender’s margin can be complicated and hard to assess.”
Issues to consider, red flags
When preparing to speak to a lender, there are a few key issues a borrower should consider when sitting down to have an initial conversation. These can include a lender’s patience and flexibility in speaking either by phone or in-person, the clarity the lender provides in explaining the responsibilities for them and for the borrower when engaging in a reverse mortgage and whether or not the lender suggests seeking additional guidance for tax advice or impacts on government benefit programs.
There are also possible red flags that should signal to a borrower that they should avoid a specific lender, including feeling pressured by the lender to make a decision before a borrower feels ready, or if a lender encourages a potential customer to use their loan proceeds for an investment or insurance product.
A lender should also avoid trying to steer a customer to a specific counselor, as opposed to simply providing a list of HUD-approved independent counselors, as they should.
Read the full article at Forbes, sourced from Pfau’s book “Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement.”