Choosing the Right Lender for a Reverse Mortgage

The concept of a reverse mortgage is very simple. Those nearing retirement age who happen to own their homes can create a steady stream of income based on the market value of their homes. The trick is to find the right reverse mortgage lender and lock in terms that are in the best interests of the homeowner. By taking the time to look closely at the qualifications that the owner must meet and the provisions found in the contract, it is possible to enjoy the most benefits and avoid common pitfalls.Residency and Reverse MortgagesOne of the provisions found in most financial arrangements of this type is that the owner must reside in the home for a certain amount of time each year. Failure to do so can provide the lender with the right to claim ownership of the home. For owners who are usually home except for an occasional vacation or a long weekend getaway, this is not a big deal. For retirees who plan on traveling several months out of each year, this can be important.The best approach is to always identify how much of the year that the owner must be in residence. Even if the other terms are very favorable, it is best to avoid arrangements that would only allow a small amount of travel time each year. Look for a plan that offers an occupancy term that is workable, and includes a little flexibility on this point. Interest RatesInterest does apply to the payments that are disbursed to the homeowner. Just as it is wise to consider the rate of interest that applies when seeking a traditional mortgage, the same is true with a reverse mortgage. Take the time to ensure that once the homeowner does pass away, the home can be sold for enough to repay the total balance, including the interest on those disbursements. Always look closely at all the provisions that define the responsibilities that the homeowner and the lender are assuming. Make sure they are balanced and that there is no misunderstanding about the rights and the responsibilities of each. Doing so will make it easier to find the ideal arrangement and be happy with the results.