Questions to Ask About a Reverse Mortgage
For homeowners aged 62 or older, and the adult children helping them, to put to a reverse mortgage lender and to the housing counselor before anyone signs. The list follows the order the decision goes in: the basics, how much you can borrow and how it is paid out, costs and interest, what you must keep doing, your spouse and heirs, then the alternatives and the signing itself. Each question has a note on what a good answer sounds like, what a worrying one sounds like, or what to do with it.
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The questions
Each question, and why to ask it
Basics
Can you walk me through how this loan works, from the first dollar I receive to the day it is repaid?
Why ask it
Put this to the lender and again to the counselor, then compare the two accounts. A sound explanation covers three things unprompted: the balance grows every month instead of shrinking, the home and its bills stay yours, and the debt is settled when you leave or die. If what you hear sounds like income with no loan behind it, you are listening to a pitch.
Do I still own my home, and whose name stays on the title?
Why ask it
The title stays in your name in the ordinary arrangement: the lender holds a lien, as with any mortgage, and does not own the house. Have them show you where the documents say so. An offer that involves signing the deed over to anyone is a different transaction, and a reason to stop and get independent legal advice.
Is this a federally insured HECM or your company's own reverse mortgage?
Why ask it
In the United States the insured version is called a Home Equity Conversion Mortgage, and it comes with required counseling and rules the government sets. A lender's own product, often sold for higher-value homes, follows its own contract. Where both are offered, ask for a quote on each and which protections the private one leaves out.
Do my age and my home qualify, and are there kinds of property you will not lend on?
Why ask it
The insured loan starts at 62, private products set their own age, and the home has to be where you live most of the year. Condos, manufactured homes and houses with more than one unit have their own conditions, so describe the property exactly. It is cheaper to hear no on the first call than after paying for an appraisal.
What happens to the mortgage or home equity loan I still owe on?
Why ask it
Expect to be told it is paid off first, out of the new loan, which is why the amount you can reach is smaller than the amount you can borrow. Bring a current statement so the lender works from the real payoff figure. If the old balance would swallow nearly all of the proceeds, ask what the loan would be doing for you beyond ending the monthly payment.
Payout
How much can I borrow, and what is that figure based on?
Why ask it
The usual inputs are the age of the youngest borrower or spouse, the appraised value up to a lending limit, and current interest rates. A quote given before anyone has asked about a younger spouse may be too high. Get the figure in dollars on a dated sheet, because it moves with rates.
After the old mortgage, the fees and any set-asides come out, how much is actually available to me?
Why ask it
This is the number to plan around, and it can sit far below the headline amount. Have it broken down line by line so you can see what each deduction is. When the net figure is small, the upfront costs are buying very little.
What are my choices for taking the money: a lump sum, monthly payments, a line of credit or a mix?
Why ask it
Each fits a different need: a lump sum clears a debt, monthly payments top up income, and a line waits for the roof or a care bill. Notice whether the lender asks what the money is for before recommending one. Interest builds only on what you have drawn, so taking everything at once is usually the costliest route.
Is there a cap on how much I can take in the first year?
Why ask it
The insured loan limits early withdrawals, with room made for paying off an existing mortgage and other required items, so have the lender state the limit in dollars for your case. It matters most if you were counting on a large sum at closing. Private loans write their own rule, which means asking it of each product.
If I leave money in a line of credit, does the unused part grow, and can you ever freeze or cut it?
Why ask it
On an adjustable-rate insured loan the unused line typically grows over time, which is one reason people open one early and leave it alone. Ask for the growth rate and where the contract says so. Then find out what would let the lender suspend draws, such as an unpaid tax bill, since a frozen line is no help in an emergency.
If I choose monthly payments, do they last as long as I live in the home or stop after a set number of years?
Why ask it
The two versions are often called tenure and term, and they pay different amounts. A term plan pays more each month but ends, while the loan and its obligations carry on. Have both figures written down, along with what happens to the payments if a spouse on the loan outlives you.
Can I switch from one payout plan to another later, and what does the change cost?
Why ask it
A plan chosen at 68 may not fit at 80. Adjustable-rate loans tend to allow a switch for a small fee, while a fixed-rate lump sum generally cannot be undone. Turn a vague 'we can look at that later' into the name of the form and the fee.
Could this money affect Medicaid, Supplemental Security Income or my taxes?
Why ask it
Take this one to the counselor and to a benefits or tax adviser, not only the lender. Loan proceeds are borrowed money, but a need-based program may count whatever is still sitting in your account the following month, and the rules vary by program and state. 'It is all tax free' answers a third of the question.
Costs
Can I have every upfront cost in writing: origination fee, mortgage insurance, appraisal, title and closing costs?
Why ask it
Reverse mortgages tend to cost more to set up than ordinary home loans, and the total is easy to miss because it is rarely paid in cash. Get the itemized estimate before you pay for anything except counseling. Then mark which lines are the lender's own, since those are the ones another lender might beat.
What is the mortgage insurance premium, at closing and each year, and what does it protect?
Why ask it
Many borrowers assume it protects them the way homeowners insurance does. On the insured loan it stands behind the contract's promises: that the money keeps coming if the lender fails, and that you or your heirs will not owe more than the home is worth when the loan is repaid. Get both premiums in dollars, because the yearly one is added to your balance.
Is the interest rate fixed or adjustable, and which payout choices come with each?
Why ask it
The rate type often decides the payout: a fixed rate usually means taking everything as one lump sum, and the line of credit and monthly plans usually come with an adjustable rate. So choose the payout first and let the rate type follow. Push back if a fixed rate is recommended before anyone has asked whether you need all the money now.
On an adjustable rate, what index is it tied to, what margin do you add, and what are the caps?
Why ask it
The index moves with the market, but the margin is the lender's and stays for the life of the loan. A lower margin slows the growth of the balance and can raise what you qualify for, so compare margins across quotes the way you would compare rates. Write down the cap on each adjustment and the cap over the whole loan.
Can you price this two ways, one with lower fees up front and one with a lower rate?
Why ask it
Lenders can often trade one for the other. Lower fees suit someone who may move within a few years; the lower rate wins when you expect to stay a long time and draw a lot. A loan officer who can only show one version may not be showing you the one that fits.
Are the costs paid in cash or rolled into the loan, and what do they grow to if rolled in?
Why ask it
Financing the costs is normal and means nothing is due at the table. It also means interest and insurance are charged on them for as long as the loan lasts. Have the financed costs shown as a dollar figure at ten years and at twenty.
Is there a monthly servicing fee, and is money held back from my loan to cover it?
Why ask it
Some lenders charge one and some build it into the rate. Where there is a set-aside, it reduces what you can draw from the first day, so it belongs in the net cash figure. Have the fee added up over twenty years, which is the size to judge it at.
Can you show me the loan balance and my remaining equity year by year?
Why ask it
Request the schedule twice: once with modest home appreciation and once with none. The point is to see how quickly compounding interest eats the equity you might want later for a move or for care. A lender who only has the rising-price version is showing you the flattering one.
What does the loan cost in total if I keep it two years, ten years or the rest of my life?
Why ask it
US lenders provide a total annual loan cost disclosure that answers exactly this, and it shows how expensive a reverse mortgage is when repaid early, because the setup costs are spread over so few years. If a move or a care home is possible within a few years, take that row seriously. Elsewhere, ask for the equivalent projection.
Can I pay down the balance whenever I like, and is there any penalty for paying the loan off early?
Why ask it
No monthly payment is required, but voluntary ones are usually allowed, and some borrowers pay the interest to keep the balance flat. Find out how a payment is applied and whether it restores room on a line of credit. Look for the prepayment clause in the contract yourself; do not rely on a verbal no.
Obligations
What do I have to keep paying and doing for the loan to stay in good standing?
Why ask it
The standard list is property taxes, homeowners insurance, any association dues, basic upkeep, and living in the home as your main residence. Get it in writing and add up what those bills cost a year now. A reverse mortgage ends the mortgage payment, not the cost of owning a house, and a presentation that skips this part is leaving out the way people lose homes.
What would make the loan come due while I am still alive, and how much warning would I get?
Why ask it
Expect a short list: selling, no longer living in the home as your main residence, or letting one of the obligations lapse. Have the lender point to the clause that lists them. Then ask what the first letter looks like and how many days it gives you to answer.
What happens, step by step, if a property tax or insurance bill goes unpaid?
Why ask it
You want the sequence: the notice, how long you have to catch up, whether the lender pays and adds it to the balance, and when foreclosure can start. Follow up with repayment plans and any relief for older or seriously ill borrowers. Hearing 'that rarely happens' tells you nothing about what the servicer would do.
What will you check about my income and credit, and could that lead to a set-aside for taxes and insurance?
Why ask it
The insured loan includes a financial assessment of whether you can keep up the property charges. If the lender has doubts, part of the loan can be held back to pay those bills for you, which protects the home and shrinks the cash. Learn the size of any set-aside before you weigh this loan against other options.
How long can I be away, for travel, a hospital stay or time in a care home, before the loan is treated as due?
Why ask it
There are usually two clocks, one for ordinary absences and a longer one for medical stays, and both are shorter than people expect. Get each in months, and check whether a co-borrower still living there changes anything. Anyone with a long rehab or winters away on the horizon should hear this before signing.
What standard of repair do you expect, and will the appraisal require work before closing?
Why ask it
An appraiser can flag a failing roof, peeling paint or a missing handrail, and the lender may hold money back until the work is done. Ask who chooses the contractor and how long you get. For the later years, find out whether the servicer inspects and what it would do about a house that is slipping.
What paperwork do I have to return each year, and what happens if I miss it?
Why ask it
Servicers generally send a yearly form asking you to confirm that you still live in the home, and an unanswered one can start a default process. Find out which month it arrives, whether a call or a second letter follows a missed one, and how long you get to put it right. A form like this is easy to lose during a hospital stay, which is the reason to ask.
Who will service the loan after closing, and how do I reach a person there?
Why ask it
The company that sells the loan is often not the one that sends statements and handles problems for the next twenty years. Get the servicer's name and whether the loan is likely to be transferred. Then look the servicer up with your consumer finance regulator before you commit.
If I decide to sell and move in a few years, how does that work and what would I walk away with?
Why ask it
You can sell at any time: the loan is paid from the sale and whatever is left is yours. Have the lender estimate the balance at year three and year five and set it against a cautious sale price less selling costs. If you already suspect you will not stay long, say so now and see whether the recommendation changes.
Spouse and heirs
Should my spouse and I both be borrowers, and what changes if only one of us is?
Why ask it
This matters most when one spouse is under 62 or is not on the title. Leaving a spouse off the loan has cost surviving spouses their homes in the past; the insured loan now has protections for a spouse who is not a borrower, but they come with conditions and fall short of what a borrower has. Be wary of anyone who suggests taking a spouse off the title to make the numbers work.
If I die or move into care first, can my spouse stay in the home, and does the money keep coming?
Why ask it
These are two separate answers. A co-borrower keeps both the home and access to the funds; a spouse who is not a borrower may be allowed to stay but lose the payments and the line of credit. Pin down what the spouse must do, and by what deadline, to keep that right, and have it put in writing.
When the last borrower dies, how long do the heirs have to repay or sell, and can they ask for more time?
Why ask it
The servicer sends a notice that the loan is due, and the clock from that letter is counted in months, with extensions that have to be requested and backed by proof the house is listed or financing is underway. Get the timeline in writing and give a copy to whoever will handle the estate. Heirs who go quiet tend to end up in foreclosure by default.
If the balance ends up higher than the house is worth, does my estate or my family owe the difference?
Why ask it
The answer you are looking for is no: the loan is non-recourse, meaning the home is the only thing the lender can collect from. That is a feature of the insured loan and should be written into a private one, so read the wording for yourself. Vagueness on this point is a reason to walk away.
If my children want to keep the house, what would they have to pay?
Why ask it
Usually the full balance, or a set percentage of the appraised value when the balance is higher than the home is worth, so get that percentage and who orders the appraisal. Heirs normally need cash or a new mortgage to do it, inside the same deadline. If keeping the house in the family matters to you, say so now, because it may argue for borrowing less.
If the house sells for more than the loan balance, who gets the rest?
Why ask it
You do, or your estate does. It is worth hearing the lender say it, because many people believe the bank takes the house and everything in it. Go on to how a payoff figure is requested and how long it takes, since a sale cannot close without one.
What happens to a relative or caregiver who lives with me when the loan comes due?
Why ask it
Someone who is not a borrower generally has no right to stay once the loan is due, however long they have lived there. If an adult child or a sibling depends on the house, raise it with the counselor before applying. It can change whether this is the right loan at all.
Can I name a family member to get copies of your notices and to speak to you if I cannot?
Why ask it
Servicers will not discuss an account with family unless the paperwork is in place, and a crisis is a bad time to start it. Duplicate notices sent to a son, daughter or friend are one form; authority to act for you is another, and a power of attorney may need the servicer's approval in advance. File both at closing.
Alternatives and signing
What else could meet this need: a home equity loan or line of credit, a refinance, or selling and moving somewhere smaller?
Why ask it
This belongs to the counselor, who earns nothing from the loan. A home equity line costs less to set up but needs monthly payments and enough income to qualify; selling frees the most money and means moving. A fair answer sets each beside the reverse mortgage for your situation, not in general.
Are there state or local programs that would cover what I need the money for?
Why ask it
Property tax deferral for older homeowners, repair grants, utility help and single-purpose loans from local agencies exist in many places and cost little or nothing. What is available depends entirely on where you live, so try the counselor and the local agency on aging. If the need is one tax bill or one roof, a smaller tool may do.
Given my age and how long I plan to stay, would waiting a few years or borrowing less serve me better?
Why ask it
Borrowing early leaves more years for interest to compound, and equity used up in your sixties is not there to draw on in your eighties. A lender willing to say 'not yet' or 'take less' is one worth trusting with the rest. Have them sketch the smallest loan that would solve the problem.
How do I find a counselor you have not picked for me, and what does the session cost?
Why ask it
For the insured loan the lender should hand you a list of approved agencies and leave the choice to you. Call two and compare the fee, and whether it can be reduced for hardship. A session that takes fifteen minutes and ends in a certificate has not done its job, so book another.
From application to the first payment, how long does this take, and which steps wait on me?
Why ask it
Counseling, the appraisal, any required repairs and underwriting each add time, so expect weeks, not days, and ask for the lender's own recent figure. It matters when the money is meant for a bill with a date on it, such as a tax deadline or a care home deposit. If the loan cannot arrive in time, work out what covers the gap before you apply.
How are you paid on this loan, and does it change with the rate or with how much I take at closing?
Why ask it
A loan officer's pay can depend on the margin, the fees or the size of the first draw, and a straight answer tells you which way the advice might lean. That does not make the advice wrong. It does mean a suggestion to take more money sooner deserves a second opinion from the counselor.
Is anyone connected with this loan also recommending something to buy with the money?
Why ask it
An annuity, an insurance policy, an investment or a home improvement contract pitched alongside the loan is the classic warning sign. The seller earns twice and you pay loan interest on money tied up elsewhere. Decline, and mention it to the counselor.
What will I have paid if I pull out after counseling or after the appraisal?
Why ask it
Usually the counseling fee and the appraisal and little else, but lenders differ on application and credit report charges. Knowing the figure in advance makes it easier to walk away when the numbers disappoint. If a large deposit is wanted before the appraisal, ask exactly what it buys.
Can I take the full set of documents home, and how many days do I have to cancel after signing?
Why ask it
Reading the note at your own table, with a son, daughter or lawyer beside you, catches things a closing appointment does not. Many loans carry a short cancellation window after signing: learn how many days, whether weekends count, and where the written notice must be sent. A closer who objects to either request is working to a schedule that is not yours.
How to question a reverse mortgage lender and counselor
Practical guidance for the conversation itself
Before the first call
Write down what the money is for
A reverse mortgage that ends a mortgage payment is a different decision from one that pays for a roof or covers a monthly shortfall. Put the need in one sentence with a dollar figure. Every later answer, from the payout plan to the alternatives, is judged against it.
Gather four papers
The latest mortgage statement, the property tax bill, the homeowners insurance bill and any association dues. With those the lender can quote a net figure instead of a headline, and you can see what owning the house will still cost each year once the loan is in place.
Decide who sits in
Both spouses, whether or not both will be borrowers, and at least one adult child or trusted friend. Anyone who lives in the house or expects to inherit it has a stake in the answers, and a second listener catches what the first one misses.
See the counselor early
Counseling has to happen before an insured loan can go ahead, but you can book it before you have settled on a lender. Going early means you hear the alternatives from someone who earns nothing from the loan while you are still free to take them.
With the lender and the counselor
Ask both of them the same questions
The questions under Basics, under Obligations and under Spouse and heirs are worth putting to the lender and then to the counselor. Where the two accounts differ, go back to the lender with the counselor's version and ask which one is in the contract.
Ask for dollars and dates
Percentages hide the size of things. A premium, a margin or a set-aside means more as a dollar amount today and at ten years, and a deadline means more as a number of days counted from a named letter.
Have it sent in writing
A dated estimate, the year-by-year balance schedule and the cost disclosure can all be emailed or mailed. What a loan officer says on the phone and will not put on paper should not count in your decision.
Let the adult child ask the hard ones
Parents are often reluctant to ask what happens when they die or go into care. Agree beforehand that the son or daughter will raise those questions, so the parent does not have to and nothing is left out from politeness.
Comparing two or three quotes
Same payout plan on every quote
A lump sum from one lender and a line of credit from another cannot be compared. Ask each for the same plan, on the same day if you can, since the amount available moves with rates.
Line up margin, fees and net cash
Three numbers do most of the work: the lender's margin, the total upfront cost, and the cash available after the old mortgage and set-asides. A quote that wins on one usually gives something back on another, and you want to see where.
Read the cost at your own horizon
Use the row of the cost disclosure that matches how long you expect to stay. Over five years the upfront fees dominate. Over twenty, the rate and the margin do.
Put doing nothing and selling on the same page
Add two more columns: staying put with no loan, and selling for something smaller. Estimate where each leaves you in ten years. If the reverse mortgage only looks good next to another reverse mortgage, the comparison is too narrow.
Reasons to stop and step back
Pressure to sign this week
Rates move, but not so fast that a decision about your home has to be made in days. Urgency from the seller is a cost to you, and a loan that is right will still be there after you have slept on it.
A second product attached
Anyone who pairs the loan with an annuity, an investment or a repair contract is being paid from your equity twice. Treat the pairing itself as the warning, whatever the merits of the product.
Counseling treated as a formality
A lender who steers you to one agency, offers to coach you through the session or says the family need not attend is working against the safeguard that exists for you.
The deed, or a form with blanks
A reverse mortgage does not ask you to transfer the title, and nothing you sign should have empty spaces. If someone asks for either, stop and take the papers to a lawyer or a housing counselor before doing anything else.
You cannot explain it back
Before signing, tell a family member in your own words what makes the loan due, what you must keep paying and what your heirs will face. If you cannot, the loan has not been explained well enough yet.