Before You Bite, Take Everything Into Consideration A reverse mortgage is generally an adjustable-rate loan that carries a heavy front load of costs, so it's usually not a good deal if the borrower isn't going to stay put for a long time. This rate includes all loan charges, such as interest, closing costs, insurance and service fees. As the TALC rate makes clear, over time the loan rate on a reverse mortgage may drop as low or lower than those being charged on regular mortgages. Essentially, the longer the homeowner lives beyond his or her average life expectancy and stays in the home, the lower the cost. Assuming the homeowner takes out a line of credit, a reverse mortgage shouldn't affect his or her ability to receive need-based benefits from the government, such as Medicaid or food stamps.
Important Caveats Make sure the borrower understands the program and has explored all other options.
Counseling is required for federally insured loans, and a good counselor should answer your questions or direct you to experts who can. Examine the numbers. Study the printouts the lender must provide. The total amount of cash that a homeowner can access immediately and over time can vary by thousands of dollars from one loan package to another. Get figures through the entire period and beyond to see what would happen if the homeowner stays in the home for a shorter or longer time than originally planned.