As part of obtaining a reverse mortgage, every (potential) borrower is required to undergo a counseling session with a HUD-approved agency. Among other things, counselors are required to provide participants with a copy of the National Counsel on Ageing (NCOA) reverse mortgage handbook. As it turns out, this booklet is a great resource, and should be read by all borrowers. Why wait until you’re already knee-deep in the application process – at which point the counseling session is a mere formality? Why not read it now?!

According to the NCOA, the decision to obtain a reverse mortgage actually involves two separate decisions:

1) Is it right to stay in your home (as opposed to moving into a smaller home or into a Continuing Care Retirement Community [CCRC])?

2) If you can’t afford to stay in your home, what is the best way to obtain assistance/financing?

According to NCOA, the former decision is actually more difficult. One must decide whether the existing home is a suitable place to age, especially given that your health will probably be in a gradual, but continuous state of decline. If you already have serious health problems, then this issue is already of pressing importance. You should consider both the home itself, as well its location. If you become handicapped, will you be able to continue to live there? If you can’t drive, will you still be able to take care of yourself? [These questions are so weighty that I think I will devote my next post just to helping potential borrowers sort through this issue].

Then, there are the financial considerations. If you’ve decided that you want to remain in your home, can you afford to do so currently? Could you afford to do so if you health deteriorated and/or you require additional help. The brochure provides readers with some average cost figures, designed to help them budget for this latter possibility. Before obtaining financing/assistance of any kind, the NCOA recommends that readers draw up detailed budgets, taking both current household and (future) medical expenses into account. At this point, they can begin to estimate how much cash they will require if they are to continue living in the same home.

Borrowers are advised to first look at their own personal financial situation before seeking outside help. The booklet then lays out all of the loan options available to borrowers, along with the advantages and disadvantages of each one. There are home equity loans, single-purpose reverse mortgages, and Home Equity Conversion Mortgages (HECM), all of which are given equal space.

It is unfortunate that the majority of those who are provided with this pamphlet will have already made the decision to obtain a reverse mortgage prior to reading it. Do yourself a favor, and get educated before you begin the process.