Perhaps you’re a senior with limited income, or the child of an elderly parent having financial difficulty. Many like you have been helped by reverse mortgages, also called home equity conversion mortgages or HECM. Most homeowners over the age of 62 with significant equity in their homes can qualify, but how do you start the process?
In addition to any financial or legal advice you may seek, you will also need a dependable lender, who may help to act as both legal and financial adviser if they are doing their jobs. Predatory lending is responsible for reverse mortgages’ questionable reputation, though, and must be avoided to protect you and your family. Once you are sure you have a professional and dependable lender, the federal government should be happy to insure your loan, making it extremely secure.
After you understand the basics of reverse mortgages and it’s time to call a lender, there are some things to consider. Here are our tips for finding a dependable reverse mortgage lender.
National or Local
The first thing to consider is whether you want the tested and proven experience of national lenders, or if you prefer the more personal approach of local lenders. HECM lenders should offer virtually the same loans or payday advance, but the fees and rates will be different as will the level of customer service. Expect better deals with the big guys and more one-on-one attention from local lenders.
The Right Credentials
There are several ways you can see if your lender is credible, most set up by the federal government to ensure disclosure and protect seniors. First, is your lender a member of the Better Business Bureau? This is the first sign your lender is dedicated to trustworthy service.
HECM lenders are also held accountable by the Federal Housing Association (FHA) and the Department of Housing and Development (HUD) before being insured by the government. This helpful HUD tool let’s you search for government approved lenders.
Finally, the National Reverse Mortgage Loan Association (NRMLA) accepts members who have promised to uphold ethical and lawful interactions with their clients. They are encouraged to have full disclosure with borrowers about the benefits and potential problems following their loans.
Cost and Pricing
Some costs in a reverse mortgage are federally regulated and capped, while others will vary depending on lender. Like most things in life, there are a variety of lenders to choose from and the goal is to get the quality of service which you payday advance for, however much that is.
Varying costs will include the loan interest rate, closing costs and origination and servicing fees. Typically many of the fees can be rolled into the loan and interest rates do not need to be paid until the loan is repaid. Be aware that you can get a fixed or adjustable rate loan.
Getting an HECM means other fees like Mortgage Insurance Premium (MIP) are set by the government and do not change between lenders.
Be Tough in Negotiations
You’ve worked incredibly hard to build equity in your home, so it’s okay to be tough on your lender during negotiations and when asking questions about the future of your finances. In addition to thoroughly discussing interest rates and lending fees, ask your lender questions. Ask them what the potential downsides of a reverse mortgage are and what alternatives to reverse mortgage they would recommend. While you should already know the answer to these questions, it will help you gauge your lender’s honesty and ethical standards.
Sometimes lenders only work on a loan until the paperwork is finalized, and some keep on it until the loan is finalized. If you’re seeking an ongoing relationship with your lender, ask if they will continue to work on your behalf.
Getting a reverse mortgage is a secure option for seniors seeking another source of income and one less bill to worry about. Most loans are federally insured and there are many ways to determine the credibility of your lender, so you don’t need to worry about your income stream being interrupted or a surprise figure when your payday advance or loan comes due. Speak with a reputable lender today to determine if a reverse mortgage really is for you.