Reverse Mortgages 101

Step 1. Consider the alternatives to getting money other than from a reverse mortgage. For instance, consider:

• A Home Equity Loan or conventional mortgage
• Sell the house and move into a less expensive house
• Rent part of the house for an income
• Other potential sources of raising funds from your own assets or from family or friends. (See the documents in "To Learn More.")

Step 2. Contact at least two lenders (one of which is HUD) and compare mortgages.

Each lender must provide a print out that shows how the numbers would work. If requested, each lender should also be able to provide a comparison among the different plans it has available.

If you want to crunch numbers on your own, it may be helpful to look at the calculator at:

• The non-profit, National Center for Home Equity Conversion. www.reverseweb.com/aarp/calculator.asp .
• National Reverse Mortgage Lenders Association www.nrmla.org
• AARP, www.AARP.org /revmort

To determine your home's value, you can get an instant "home valuation report" at www.homegain.com . Also check the following web sites which estimate the value of most homes in the U.S.. Keep in mind that the valuations may not be accurate. They do not send out home appraisers. Instead, the sites merely gather information about your residence and nearby properties. For example, the sites do not take into account recent renovations in either yours or comparable homes.  They also do not generally work for very expensive, very inexpensive or unique homes. Some of the better known sites:

• www.zillow.com  
• www.Trulia.com
• www.housevalues.com

Step 3. Speak with a qualified counselor.

Anyone considering a HUD Reverse Mortgage must obtain counseling from a HUD-approved counseling agency. To locate one near you, call 800.569.4287 or search at www.hud.gov/offices/hsg/sfh/hecm/hecmlist.cfm . 

• Preferably look for a counselor who works on a fee only basis.
• You shouldn't be pitched financial products to buy with the proceeds. If you are, review the suggestions with a good deal of skepticism. The idea of a reverse mortgage is to help you, not a salesman.

Step 4. Consider adding your spouse

If you are married, or living with a partner, naming only yourself on a reverse mortgage puts the other person at risk of losing the house if you die because the mortgage is automatically payable on death. The other person would have to pay off the loan to stay in the house. This triggering effect will not happen if you are both on the mortgage.

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