Reverse Mortgage Lenders
At first glance, reverse mortgages seem too good to be true; however, many reverse mortgage lenders work hard to ensure their clients, age 62 and older, obtain good terms. These programs convert home equity built up over a lifetime into cash that can be used for anything in retirement.
What is a Reverse Mortgage?
Reverse mortgages are officially known as home equity conversion mortgages (HECMs). The most useful reverse mortgage lenders offer multiple options for converting home equity into cash. As part of a broader retirement strategy, this option can increase the longevity and usefulness of retirement savings.
The U.S. federal government does insure specific reverse mortgages through the Department of Housing and Urban Development (HUD). The only way to achieve this insurance is if the Federal Housing Administration approves the lender, and the lender specifies in the terms that it is a HECM. Having this protection means that if a lender closes, HUD will transfer it to another lender with the same original loan terms.
All HECM applicants must go through a counseling session beforehand. During this session, a counselor lays out the risks involved with reverse mortgages and lenders. This meeting is a fantastic option for asking questions since counselors are independent.
All lenders place fees on their HECMs, though most pay these fees out of the reverse mortgage loan. These include a mortgage insurance premium, third party charges, origination fee, and servicing fee. HUD caps many of these fees (check here).
The options for a reverse mortgage are designed to suit a variety of borrowers. Tenure involves equal monthly payments until both borrowers are deceased or moved. Term means the equal payments only continue for a fixed number of months. Line of credit does not involve equal payments or regular installments but instead can be drawn on at need. Both term and tenure can be modified to include a line of credit.
Reverse mortgages are loans; however, the only collateral involved is the property itself. That means all other assets stay safe. Reverse mortgages can become due early if the homeowners move, fail to keep up with property fees, or do not keep the home in good repair.
The 4 Best Reverse Mortgage Lenders
American Advisors Group (AAG) is among the most recognizable lenders on account of their advertising. AAG supports all kinds of HECM options and provides knowledgeable specialists. The company also offers HECM alternatives for those who do not meet the HUD requirements.
One Reverse Mortgage
Quicken Loans is behind One Reverse Mortgage, which operates across the country. Quicken Loans has a history of supplying exceptional customer service and making it easy to reach a representative when questions arise. This lender also provides programs for people who do not qualify for a HECM.
Quontic Bank was initially found in the northeastern United States. However, the internet means the bank has expanded its digital presence to all 50 states. Quontic Bank only offers HECMs, so all the standard requirements apply. This bank is an excellent digital possibility and provides excellent customer service through a variety of mediums.
Longbridge Financial invested in creating an intuitive user experience with its suite of online tools, including a free quote calculator. Longbridge Financial also supplies a scenario-based FAQ, which is useful in figuring out who should apply for a reverse mortgage. Longbridge does offer programs outside of HECM.
Preparing for the Reverse Mortgage Process
Before going to reverse mortgage lenders, it’s essential to prepare. The biggest favor someone looking for a reverse mortgage can do for themselves is understanding the underlying costs. For example, while the mortgage insurance premium percentage may seem small at 2% initially, it compounds over the life of the loan. Knowing the final figure beforehand helps everyone make an informed decision.
The next important item is placing the house in both names if it is not already. The rules laid out by HUD include clauses about surviving spouses and at least one spouse living in the home. Without both names on the title, the second spouse could lose their financial security.
It’s also vital to discuss reverse mortgages with heirs. In many cases, using the reverse mortgage option means heirs will receive fewer assets since they may be unable to pay off the reverse mortgage loan. By discussing it with them, everyone reaches an understanding and may even consider alternatives.
It’s also incredibly important to work with a specialist to set up a reverse mortgage. A trusted, professional specialist can help set up favorable loan terms, close HECM loopholes, and create the best situation for everyone involved.