4 Key Signs You’ve Found the Right Reverse Mortgage Lender
Written by
Jordan Rosenfeld
Edited by
Molly Sullivan
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Anyone with equity in a home can potentially take advantage of a reverse mortgage, also known as a home equity conversion mortgage (HECM), which enables a homeowner to access the cash of their home equity without selling their home.
These are commonly taken out by retirees who may need the cash to support their retirements. If you’re planning to undertake one of these, you’ll want to be sure you’re getting the best lender and deal for you.
Here are four key signs that you’ve found the right reverse mortgage lender for your situation, according to Steven Parangi, an attorney and owner of Alpine Mortgage, a mortgage lender.
He made clear that “a reverse mortgage isn’t a product you choose on a whim; it’s a big financial decision that can have a huge impact on a senior’s financial security and overall happiness.”
Transparency and Education
A good reverse mortgage lender will educate you about your options rather than rushing you into a decision, Parangi said. Since reverse mortgages are complex financial products, you want to go in fully informed on their benefits and potential drawbacks.
“The right lender will spend time explaining how home equity conversion mortgages (HECMs) work and make sure you understand both the benefits and obligations,” he said. They should proactively provide information on:
- Mandatory HUD counseling requirements
- How the loan proceeds can be taken (lump sum, line of credit, monthly payments or a combination)
- Ongoing property obligations (taxes, insurance, maintenance)
- Impact on heirs and estate planning
- Alternative financial solutions if a reverse mortgage isn’t the best fit
Additionally, a good reverse mortgage lender should have no problem meeting with you multiple times to answer all your questions without pressure. “This is a big financial decision that shouldn’t be rushed.”
Open and Consistent Communication
On a similar token, since the application and closing process can be complex, Parangi recommended you find a lender who keeps you informed every step of the way, responds to your calls and emails and answers your questions clearly and completely.
“This builds trust and reduces the stress of the loan process,” he said.
Competitive Rates and Transparent Costs
While all FHA-insured home equity conversion mortgages (HECMs) follow the same guidelines, Parangi said lenders can vary greatly in their rates and closing costs.
“A good lender will provide a detailed breakdown of all costs upfront and no hidden fees. These fees can add up and impact the overall cost of the reverse mortgage and the net proceeds to the borrower,” he said.
He urged anyone considering one not to be afraid to shop rates to find the best.
“Beware of lenders who downplay the fees or seem reluctant to put everything in writing. Every cost should be explained and justified.”
A Proven Track Record and Reputation
Experience matters big time in finding a reverse mortgage lender.
“The right lender will have years of experience in reverse mortgages — not just general mortgage lending — and will have closed many of these loans. A lender with a good reputation will give you more peace of mind.”
Online reviews can be helpful in researching a lender’s reputation, particularly consistent positive reviews on platforms like Google Reviews or the Better Business Bureau (BBB). Also, take into account how long they’ve been in business and if they have any complaints on their records.
Caveats To Consider
While a reverse mortgage can be a valuable tool, it isn’t right for everyone. Parangi urged watching out for the following caveats:
- Equity erosion: Reverse mortgages reduce home equity over time due to accruing interest. Borrowers should weigh this against their long-term financial goals.
- Ongoing obligations: You are still responsible for property taxes, homeowners insurance and home maintenance. Failure to meet these obligations could lead to foreclosure.
- Impact on heirs: A reverse mortgage must be repaid when the borrower passes away or moves out permanently, which could limit inheritance options.
- Medicaid eligibility: Receiving reverse mortgage proceeds may affect eligibility for means-tested programs like Medicaid.
Understanding both the benefits and potential pitfalls of reverse mortgages ensures that borrowers make choices that truly serve their needs. “The right lender isn’t just a provider — they’re a partner in helping you achieve financial security during retirement.”
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