I have a reverse mortgage, and I’m having problems with it. Was it legal to get a reverse mortgage without my lawyer explaining the situation? I never knew the pros and cons of a reverse mortgage. I think it’s a legal way to swindle homeowners out of their homes. How can I get out of the reverse mortgage?
I’m sorry to hear you’re experiencing regrets. Rest assured, reverse mortgages are highly regulated, and getting one without a lawyer’s involvement is legal as long as you receive the required counseling from a HUD-approved counselor, which explains the pros and cons in detail.
You have several options if you want to get out of your reverse mortgage. You can:
- Refinance into a traditional loan
- Pay off the reverse mortgage with other funds
- Sell your home to repay the loan
If you’re concerned about the loan balance rising, you can choose to make payments toward the interest each month, which will help protect your equity.
Remember, you’re in control and can take steps to address the situation.
Table of Contents
• Reverse Mortgages Are Highly Regulated and Offer Multiple Ways to Exit
• Ensuring Informed Decisions in Reverse Mortgages
• Were You Denied These Opportunities?
• Top FAQs
Reverse Mortgages Are Highly Regulated and Offer Multiple Ways to Exit
It’s important to clear up any misconceptions about reverse mortgages. These loans are well-regulated, and there are many opportunities to learn the pros and cons before committing. I’m curious why you felt you didn’t have access to your attorney or a chance to review the details thoroughly.
By law, lenders must allow you to choose a HUD-approved counselor. As part of the process, you’re required to attend a counseling session with a professional, typically lasting 45 minutes to an hour. Some borrowers have reported sessions lasting over 4 hours, depending on the number of questions they had.
The time spent on counseling depends entirely on you and the questions you ask. This step happens before the loan process even begins, ensuring you have the knowledge to make an informed decision. You cannot move forward without completing this counseling session.
After the counseling, the reverse mortgage application process typically takes 30 to 45 days. During this period, you are free to consult with anyone—whether it’s a lawyer, accountant, or family member—before finalizing any decisions.
I can’t speak to the actions of your loan officer, but we always recommend that borrowers seek advice from trusted individuals and professionals before proceeding.
When it comes time to sign your loan documents, you still have a 3-day right of rescission, giving you the option to cancel the reverse mortgage with no cost. This period doesn’t include the signing day, Sundays, or holidays, often giving you 4 or 5 days to reconsider.
Throughout the entire process, you have multiple chances to get out of a reverse mortgage or seek help from professionals you trust before the loan is finalized.
Ensuring Informed Decisions in Reverse Mortgages
Required HUD-Approved Counseling
Before moving forward with a reverse mortgage, every borrower must choose a HUD-approved counselor and complete a mandatory counseling session. These sessions are designed to be thorough, lasting at least 45 minutes, and can extend for several hours, depending on the borrower’s questions. This ensures you fully understand the process and your options before committing.
The Loan Application and Processing Period
Once you apply, the reverse mortgage processing period typically lasts 30 to 45 days. During this time, borrowers are encouraged to consult with family members, attorneys, or financial advisors. You can use your application documents to get professional advice before making final decisions.
Built-in Borrower Safeguards
Although experiences with loan originators may differ, the industry standard is to encourage borrowers to seek independent advice. Consulting with trusted professionals during the loan process is key to making an informed decision.
Right to Rescind the Loan
After you sign your reverse mortgage documents, you still have a 3-day right to rescind, allowing you to cancel the loan without penalty. This period excludes the signing day, Sundays, and holidays, often giving you 4 to 5 days to reconsider and seek further consultation if needed.
Additional Opportunities for Counsel
Before finalizing the loan, this rescission period offers a final opportunity to review all documentation and get additional advice. This safeguard ensures you have the time and resources to make the best decision for your situation.
Were You Denied These Opportunities?
Even if you didn’t consult an attorney or advisor during the process, a quick internet search for “pros and cons of a reverse mortgage” would provide a wealth of information. In fact, the phrase is so commonly searched that it auto-fills in search engines, offering access to hundreds of resources from attorneys, lenders, HUD, AARP, and more.
The last thing any reputable lender wants is to “swindle you out of your home.” You had ample time to seek legal advice or consult a financial advisor if you had any doubts. If you now feel you made the wrong decision, it’s understandable—many people experience buyer’s remorse at some point.
While some borrowers may encounter less-than-ideal loan originators or lenders, it’s important not to generalize the entire reverse mortgage process as one that lacks transparency or is aimed at taking advantage of homeowners.
Laws vary by state, but many have cooling-off periods to allow borrowers to reconsider their decision early in the loan process. For example, in California, lenders must wait 7 days after counseling before proceeding, giving borrowers even more time to evaluate the loan and consult with trusted legal or financial advisors.
The reverse mortgage process is thorough and designed to ensure you fully understand the terms before moving forward. Take the time to consult with professionals upfront and avoid any regrets later.
Top FAQs
Q.
How does someone get out of a reverse mortgage?
There are several ways to get out of a reverse mortgage. Since reverse mortgage loans never have prepayment penalties, you can pay off the loan anytime. The most common methods include refinancing the reverse mortgage into a traditional loan or selling the property to pay off the balance, especially if the homeowner wants to move to a new home.
Q.
Can I walk away from a reverse mortgage?
Yes, you can walk away from a reverse mortgage. The property is the only collateral since it’s a non-recourse loan. If you choose to walk away, the home may go into foreclosure, but you will never owe more than the property’s value at the time.
Q.
Can I negotiate a reverse mortgage payoff?
You cannot negotiate a reverse mortgage payoff. However, if you are an heir to a property with a reverse mortgage, you can repay 95% of the home’s appraised value at the time if the loan balance exceeds the property’s value and you wish to keep the home.
Q.
Why do people say reverse mortgages are bad?
People often say reverse mortgages are bad for two reasons: either the loan isn’t a good fit for their specific circ*mstances, or they have been misinformed. Reverse mortgages aren’t for everyone—for example, if you plan to relocate soon, a reverse mortgage may not be the right option. Additionally, some people still associate reverse mortgages with problematic loans from private banks before 1988, before the Home Equity Conversion Mortgage (HECM) program made these loans government-insured and more advantageous for homeowners.
Q.
Do you have the right to rescind a reverse mortgage?
Yes, you can rescind a reverse mortgage loan on your existing home. Federal law gives homeowners a 3-day right of rescission after signing the loan documents, during which you can cancel the loan with no penalties before it is finalized. However, this right does not apply to reverse mortgage purchase transactions, which do not include a rescission period.
ARLO recommends these helpful resources:
- Is a Reverse Mortgage Right for You? 3 Questions to Consider!
- Are Reverse Mortgages a Scam? Know the Facts!
