How to Choose a Lender
Deciding to obtain a Home Equity Conversion Mortgage (HECM) is a significant financial decision and should be treated as such. It is equally important for homeowners to choose a lender that is committed to helping them pick the Reverse Mortgage option that is best for their needs.
Potential borrowers do not need to work with a financial adviser to get a HECM, however many financial advisers encourage their clients to look into HECMs as a financial planning option. Potential HECM borrowers can ask their financial adviser for lender recommendations or research lenders on their own.
Borrowers should also compare each lender’s costs and expertise. Costs such as origination fees, servicing fees, closing costs can vary between lenders. Homeowners can speak with HECM loan specialists to provide their specific costs. Portfolio lenders are often the best match for potential borrowers because they lend, service and own the loan. A borrower’s relationship with a lender is expected to continue for many years; so you should be confident that your lender has the experience to provide the best product and the highest level of customer service for years to come.
In the past, HECMs were considered an option of last resort. Today, due to product improvements and greater awareness, many older Americans have realized that a HECM can be used as a strategic financial tool that can support a wide variety of financial situations. Borrowers looking to extend the amount of funds available to them in retirement have many HECM options to meet their needs. For example, that may include:
- Paying off a traditional mortgage, in order to increase monthly cash flow (You'll still have to pay for property-related taxes, insurance and upkeep. A HECM is a home-secured debt that's payable upon default or a maturity event.)
- Taking a line of credit to be better prepared for a rainy day
- Or choosing a lump sum option to afford a major expense like medical costs or a home purchase.
There is often a HECM option that will benefit most qualified homeowners.
Most importantly, potential borrowers should choose a lender they trust. Homeowners should research the lenders they are considering and check their Better Business Bureau rating. Loan specialists should be able to offer multiple HECM options, and help the potential borrower choose the option that will best fit their needs while treating the borrower with respect.
Before choosing a lender, it can be beneficial to learn about closing costs and interest rates. Homeowners are encouraged to find a lender that they feel comfortable working with. There are two important questions homeowners should consider asking potential lenders:
How much are your closing costs, and what are they for? And what are my interest rate options?
Closing costs and interest rates vary between lenders, and you should make sure you know what the costs include and how much you will be paying. Lenders should be up-front about the fees that will be charged, and be able to explain what the costs include and how much they are.
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