3 Red Flags to Watch Out For When Shopping for a Reverse Mortgage
After more than 25 years in mortgage lending, I’ve learned one thing above all else: homeowners want to feel protected. They want to know they’re not being sold to, pressured, or pushed into something that doesn’t feel right. And frankly, they deserve that.
That’s why when I talk with homeowners about reverse mortgages, I often remind them that there is no rush. This decision is far too important to be made under pressure. If you need weeks, months, or even years to feel comfortable—that’s perfectly okay. My role isn’t to hurry you along. My role is to make sure you feel informed, secure, and confident with whichever path you choose.
And even if you don’t move forward with me, I want you to leave every conversation with tools that will protect you from the less ethical voices in our industry. Because the sad truth is, not everyone who talks about reverse mortgages has the homeowner’s best interest at heart.
Why I Focus on Education First
In addition to working directly with homeowners, I also train real estate professionals on how to help seniors purchase a new home using a reverse mortgage—a powerful but often misunderstood tool. I also educate financial planners on the strategic use of the HECM line of credit, which can help protect retirement assets during market downturns.
By teaching others, I’m reinforcing the same principle I use with clients: education before action. A reverse mortgage is not just a loan—it’s a financial planning tool. When used correctly, it can extend retirement savings, reduce financial stress, and even allow homeowners to right-size into a home that better fits their lifestyle. But those benefits only come when the decision is made with clarity, honesty, and transparency.
The Three Red Flags You Should Watch Out For
Here are three warning signs I always leave with homeowners. Whether you work with me or another professional, these red flags can save you from a bad experience.
Red Flag #1: High-Pressure Tactics
If someone tells you, “This deal ends Friday,” or “You need to sign this week or lose out,” that’s a sign to step away. Reverse mortgages are federally regulated products. Rates and margins do change, but never so drastically that you should be forced to sign without time to think it through.
A reverse mortgage is a lifelong decision—it deserves the same thoughtful approach as any other major financial step.
Red Flag #2: Vague or Shifting Fees
Transparency is everything. You have the right to a clear, written, itemized breakdown of all costs associated with your loan. Some less trustworthy lenders may skim over this, quote one figure at the beginning, and then surprise you with higher costs later. If the higher cost come right before closing, call me, the appraisal can be transferred, and I can close you quickly.
When I work with clients, I make sure you know exactly what to expect. No smoke, no mirrors. If you ever ask another lender for an itemized fee sheet and they hesitate, that’s your cue to look elsewhere.
Red Flag #3: Coaching During HUD Counseling
Every homeowner considering a reverse mortgage must complete an independent HUD counseling session. The counselor’s job is to ensure you fully understand the pros and cons before proceeding.
No one should ever coach you on how to answer those questions or tell you which agency to use. If they do, that’s a major red flag. Your voice, your concerns, and your understanding should guide the counseling—not a lender’s script.
Understanding Margins: Why They Matter More Than You Think
One of the most overlooked—but most important—parts of a reverse mortgage is the margin.
Here’s a simple way to think about it:
- The interest rate on your reverse mortgage is made up of two parts: the index (usually based on a published rate like SOFR or CMT) and the margin.
- The margin is the fixed number the lender adds on top of the index. Unlike the index, which fluctuates, the margin never changes once you lock in your loan.
Why does this matter? Because the margin determines:
- How quickly your loan balance grows over time – the lower the margin, the lower the interest rate, the slower your balance increases.
- The long-term performance of your loan – with a HECM, the unused credit line grows over time and compounds. A lower margin means your loan balance grows more slowly, and you preserve more equity.
- The overall cost of the loan – higher margins make the loan more expensive in the long run.
This is why I encourage every homeowner to pay close attention to the margin when comparing reverse mortgage offers. A lender might advertise a “low cost” but bury a higher margin in the fine print. That higher margin could cost you thousands over the years. I work with my clients to weigh the closing cost vs the long term cost of the loan and help them select the best option.
When we review your options, I’ll walk you through exactly what margin you’re being offered, how it stacks up against industry standards, and what it means for your loan’s long-term performance.
Protecting Assets with the HECM Line of Credit
One of the greatest advantages of a reverse mortgage is the HECM line of credit, which grows over time and can’t be frozen or reduced like a HELOC can—even if home values drop or the stock market tumbles.
For retirees, this is an invaluable safeguard. Many financial planners I work with use the HECM line of credit as a way to:
- Preserve investment portfolios during downturns
- Provide a tax-free source of funds in retirement
- Create financial flexibility without having to sell assets at the wrong time
When paired with a low margin, the growth of this credit line can be remarkable, giving homeowners more peace of mind and more options in the years ahead.
Closing Thoughts: Why Trust Matters Most
At the end of the day, reverse mortgages aren’t just about numbers—they’re about people. They’re about seniors who want to enjoy retirement without the fear of running out of money, about couples who want to age in place comfortably, and about families who want to protect their loved ones’ financial security.
When you speak with me, you’ll never feel rushed. Instead, you’ll feel protected and informed. I’ll leave you with practical tools—like checklists, process maps, or these red flags—so that whether you move forward with me or not, you’ll be in a stronger position to make a confident choice.
Because building trust isn’t about closing a loan today—it’s about ensuring you feel safe tomorrow. And that’s what 23 years of experience has taught me matters most.
If you would like to learn more and not feel rushed, complete this form to schedule time to talk.
