Reverse Mortgage Counseling
Before you start the application process in the Home Equity Conversion Mortgage (HECM) program you are required to meet with an independent counselor approved by the Department of Housing and Urban Development (HUD). Agencies with approved HECM counselors in your area can be found at this web address:
It is important that the counselor assists you to fully understand the outcomes of obtaining a HECM reverse mortgage. Issues that will be covered include your obligations as a borrower, costs of obtaining the reverse mortgage, repayment conditions, and general financial implications. You may decide to have a trusted family member or friend attend the counseling with you.
Once you have contacted a counselor, they will send you an information package to review before the counseling session takes place. The package will include loan estimates and other materials to allow you to begin making more detailed considerations of the financial implications and your choices under the HECM program. It is a good idea to write a list of your questions, concerns, and any extra information you need. During the counseling session the counselor will detail loan analysis and use computer software to compare the different choices available to you. You may request print outs from the counselor before the session so that you are better prepared to have your options explained.
Two of the key variables of a reverse mortgage the counselor will cover are interest rates and fees. The counselor will provide a large range of financial outcomes with computer modeling and loan analysis because the interest rates apply to the total of your loan balance. The balance grows each time you take a payment from the loan and the interest rates apply over the life of the loan. Most lenders also choose variable rates. The counselor will detail the impact of different combinations of fees, interest rates and payments on the amount you will owe on the reverse mortgage loan in the future.
The counseling session will generally take at least an hour. If it better suits your circumstances, you may be able to have counseling by telephone, which would typically require a number of calls. You may be charged a modest fee for counseling, but the counselor must tell you about it first. HUD approved counseling agencies are non-profit and they can not refuse to counsel you if you can not afford to pay. If you are charged a fee, it may be possible to have it paid out of the reverse mortgage with an advance payment along with other upfront fees.
Provided you are prepared for the counseling session, you should find it relatively easy and very helpful to make decisions that maximize your benefits from your reverse mortgage.