What Is A Reverse Mortgage Loan?
Reverse mortgages are a unique loan type only available to homeowners aged 62 and up. Essentially, it allows you to take out a home loan using the equity you have in your house. You can receive this loan as a lump sum, a line of credit, or as a monthly payment.
A reverse mortgage is attractive to many homeowners because you won’t be required to make monthly payments. Instead, the loan balance will become due once the borrower passes away. If the family of the deceased (or whoever the house was left to) cannot pay off the balance of the loan, the lender will sell the property to recover their money.
How To Find Reverse Mortgage Lenders
If you’re considering a reverse mortgage, the first thing you’ll want to do is make sure that you qualify. Besides being the right age, you’ll also need to have at least 50 percent equity in your home. Fortunately, one of the perks of reverse mortgage lenders is that your credit score and income won’t matter. Finally, you’ll also need to take a HUD-approved counseling session.
You’ll also want to consider potential drawbacks. For instance, if you’re living with someone, will they be able to pay off the loan once you pass? If they can’t, they’ll be forced to move out. Additionally, if you’re leaving your home to someone in your will, they’ll be responsible for paying the loan off if they want to keep the house. Once you’ve considered these possibilities, use the following tips to find the right reverse mortgage lender for you:
1. Identify multiple lenders
When searching for lenders, don’t just settle on the first one that offers reverse mortgage loans. You’ll want to compare multiple lenders to make sure that you limit your costs and avoid being taken advantage of.
2. Read lender reviews
Lender reviews are excellent ways to research your options. You’ll want to make sure that you’re working with a reputable lender who’s transparent about your choices and who won’t try to take advantage of you. You’ll also want a lender who’s available, and who will provide excellent customer service over the life of the loan. The last thing you want is to try and get in touch with your lender after you’ve taken the loan out, only to find that they’re impossible to reach.
To find a reputable lender, look them up on the Better Business Bureau website and read customer reviews online. The more customer reviews that are available, the better (as long as they are mostly positive). Some negative reviews are acceptable if they have a lot of positive reviews to cancel them out; however, be wary of lenders with no reviews at all.
3. Compare the costs
There are a handful of fees you’ll have to pay when taking out a reverse mortgage. These fees include the appraisal fee, origination fees and the closing costs. You’ll also have to pay loan interest, mortgage insurance and a servicing fee sometimes charged by the lender. These costs will vary from one lender to another, which is why it’s so essential that you compare the costs before you choose a lender.
Lenders are required to give you a TALC (Total Annual Loan Cost) at least three days before you close on a loan. A TALC breaks down the total cost you can expect in fees and interest every year of the loan. You can request a TALC from the lenders you’re comparing at the beginning of the process so that you can more effectively compare costs.
4. Consider the types of reverse mortgages available
Consider what type of reverse mortgage you want. Do you need a lump sum upfront? Would you prefer monthly payments? Or would a credit line suit your needs more? Not all reverse mortgage lenders offer all of these types of loans. Inquire about the different types of loans being offered when comparing reverse mortgage lenders.
Consider Taking Out A Reverse Mortgage Today
If you’ve decided that you can benefit from a reverse mortgage, make sure to do your research when looking for a reverse mortgage lender. These tips will help you find a reputable reverse mortgage lender that will meet your specific needs.