Reverse Mortgage Solutions: Choosing the Right Reverse Mortgage Lender
If you’re retired — or getting close — have you considered the benefits of a reverse mortgage loan to help you financially navigate this stage of life? Instead of tapping into your Social Security benefits* or retirement savings, it’s smart to educate yourself about reverse mortgages, and how to choose the right reverse mortgage lender.
How a reverse mortgage works
A Home Equity Conversion Mortgage (HECM), or reverse mortgage, is available exclusively to homeowners and homebuyers age 62 and older. It may allow you to borrow against the equity in your home, so you have cash to use today or a line of credit for whenever expenses arise — or both. A reverse mortgage can also be used to finance the purchase of a different home.
Funds from your reverse mortgage are income tax-free** and can be used to refinance your current mortgage or consolidate debt — so you can free up funds for other things, and help you avoid using your retirement savings too soon. As with any mortgage, the borrower is responsible for the home’s property taxes, homeowners’ insurance, and property maintenance.
Choosing the reverse mortgage lender that’s right for you
Applying for a reverse mortgage is a big decision that could benefit you and your family for years to come, so be sure to choose a reverse mortgage lender based on your long-term financial goals. There are many reverse mortgage lenders offering competing services at varying costs. Plan to research and connect with multiple providers, and ask the representative lots of questions about their products, their rates and fees, and their experience with reverse mortgage loans. It’s also important to work with a loan specialist you trust and feel comfortable with — someone who is responsive to your individual needs and concerns.
Here are three major areas to keep in mind when selecting your reverse mortgage lender:
1. Fees and interest rates of a reverse mortgage. As with a traditional mortgage, you will pay interest on your reverse mortgage loan. The interest rate can make a big difference in the total cost of the loan, so choosing a lender with better rates can save you significant expense over the life of the loan. Shop around and ask about current interest rates from multiple lenders. Rates can be fixed or adjustable, and you will need to decide which is best for your unique needs and goals.
2. Reverse mortgage up-front and ongoing costs. With an FHA-insuredϮ reverse mortgage (called a Home Equity Conversion Mortgage, or “HECM”), all applicants receive reverse mortgage counseling, with the fee paid directly to an independent counseling agency. Other up-front costs include a government-required mortgage insurance premium, and an origination fee and closing costs, which can vary by state and lender.
In addition to interest, ongoing costs include an annual mortgage insurance premium. Some lenders also charge a monthly servicing fee.
Be sure to ask for estimates for the fees and costs from each lender you consider. You can get a written estimate right up-front by providing certain basic information. Afterwards, the lender you choose is required to provide you with detailed disclosures regarding costs twice during the loan process: when you submit your application, and again when your loan closes.
3. Post-loan service and support. One last consideration when choosing a reverse mortgage lender: Do they continue to service your loan after your closing, or do they sell it? If it’s the latter, you will be working with a different company rather than your original lender. Keep in mind that reverse mortgage loans are often sold multiple times, just like traditional mortgages. If continuity is important to you, consider choosing a lender that services their own loans.
The financial freedom of reverse mortgages
Whether you’re planning your own retirement or helping a loved one prepare, a reverse mortgage loan can help secure the resources for a more comfortable financial future, with less financial worries. And the right reverse mortgage lender can help simplify the process by answering all your questions, addressing any concerns promptly and in a straightforward way, and helping you determine the best course of action for your individual financial circumstances.
Learn more about reverse mortgages from Reverse Mortgage Funding, or call (888) 277-1567 to set up a meeting with a licensed reverse mortgage specialist.
*Consult a financial professional. Visit www.ssa.gov.
**Consult a tax professional.
ϮThis material has not been reviewed, approved or issued by HUD, FHA or any government agency. The company is not affiliated with or acting on behalf of or at the direction of HUD/FHA or any other government agency.