How to Choose a Reverse Mortgage Lender
To take a step back, a reverse mortgage is a financial product that allows home owners over the age of 62 to receive advance payment on the equity of the home in the form of payouts. These payouts are usually used by seniors to help pay unforeseen bills, such as medical expenses.
The Federal Trade Commission (FTC) cites three types of reverse mortgages: single purpose reverse mortgages, proprietary reverse mortgages and federally-insured reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs).
A single-purpose reverse mortgage specifies in the contract the usage of the loan, for instance, to cover medical expenses not covered by the insurance company. A proprietary reverse mortgage is a private loan, designed for high value homes. A HECM is backed by the U. S. Department of Housing and Urban Development (HUD) and doesn’t require a designation for how the funds are used.
The FTC provides several payment options for a HECM:
- a single disbursement option – this is only available with a fixed rate loan, and typically offers less money than other HECM options
- a “term” option – fixed monthly cash advances for a specific time
- a “tenure” option – fixed monthly cash advances for as long as you live in your home.
- a line of credit – this lets you draw down the loan proceeds at any time, in amounts you choose, until you have used up the line of credit. This option limits the amount of interest imposed on your loan, because you owe interest on the credit that you are using.
- a combination of monthly payments and a line of credit.
The specific choice chosen should be discussed with a trusted lender to decide the option that makes the most sense for the home owner.
A neat aspect of a reverse mortgage is that it is possible only because of your hard work. A traditional mortgage is used to purchase a home, where a fixed monthly payment is allocated to the lender over the series of 20 to 30 years, in most cases. This built up in equity allows the home owner to take advantage of their diligence and secure a capital infusion in the form of a reverse mortgage.
When initiating a reverse mortgage, the home owner still retains the title of the home and the proceeds are not taxable nor will they most likely affect Medicare benefits or Social Security. When the home owner sells the home—whether it be to move closer to their Grandchildren or from death—the lender is payed back with funds from the home.
While the information so far just scrapes the surface, it provides an excellent base to begin a relationship with a reverse mortgage lender. Our team provides hundreds of loans a week and are among the most experienced businesses in conducting reverse mortgages.
Regardless if you chose our company or a competitor, the lender that you work with should provide the previous information to you at the onset of an appointment. For me personally, a turnoff in a business relationship is an overly pushy sales person who uses pressure tactics to encourage closing a deal, which is something our company does not tolerate.
Often times, our company has been recommended by CPA and money managers on behalf of their clients. Our excellent reputation certainly influences this. When we speak with a potential client, we first seek to discuss their current and future financial plans and whether or not a reverse mortgage even makes sense for their situation.
Together, for instance, we discuss options to obtain a cash infusion, while also providing the drawbacks from using one method versus the other, all the while creating an atmosphere that encourages questions to alleviate confusion.
Important questions to consider with your lender are what are left to heirs; fees and miscellaneous costs; how payment accumulates over time; variable interest rates and how it is not tax deductible; costs that are still required to be paid on the current home; what happens if a tragic accident happens to a spouse?
To initiate a relationship with our business, feel free to reach out to one of our specialist. Their number is (888) 547-8308. The business hours are Monday to Friday, 9 a.m. to 8 p.m. EST, and Saturday to Sunday, from 12 p.m. to 3 p.m. When speaking with our specialists, it is important that you provide information related to your lifestyle, such as day-to-day purchases, investments and upcoming plans.
During non-business hours, feel free to e-mail one of our specialists. If you have questions during non-business hours, our Learning Center is an excellent method to obtain credible answers. It is constantly being updated to answer the most pressing questions—along with our FAQ page.