There are several different considerations that need to be made if you are in the market for a reverse mortgage. Taking the time to consider options, compare companies and talk to a government-approved counselor will help you determine the best reverse mortgages for your unique financial needs.
As with any type of loan or mortgage, there will be differences between lenders. However, there are also different levels of support provided by various companies providing these HECM loans, or Home Equity Conversion Mortgages, and making a side by side comparison of costs, fees and options can be very helpful.
The best reverse mortgages would be those with the lowest overall costs and fees. There are limits or caps set in place by the FHA to control adjustable rate loans, which is often a good option over a standard fixed loan.
Additional costs can include a reverse mortgage fee that is charged by the lender. This will vary from lender to lender and could include closing costs, an initial Mortgage Insurance Premium (MIP), as well as an ongoing MIP of 1.25 percent.
The origination fee is based on a percentage of the property value that is set by the FHA. There is a maximum fee of $6,000 allowed regardless of the value of the home, which is good for those with high-value properties. For borrowers with a property valued up to $125,000 the lender can charge up to $2,500, but many lenders will charge less than this maximum amount.
Just like in any mortgage, the borrower will have to pay title fees, appraisal fees and escrow fees along with any other required fees. These will be deducted from the reverse mortgage amount and are not paid out-of-pocket by the borrower.
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When trying to determine if the fixed or adjustable rate loan is best for you, work with the government-approved counselor and the lender to run comparisons on the short- and long-term costs and fees.
Comparing adjustable rates based on anticipated interest rates over a reasonable time frame will also help you to determine the best reverse mortgages for your specific financial situation.
To further understand what companies you will be dealing with in the future, ask the lender if they use a third-party loan service company. You will want to know the name of the company and also find out more about them, either from the lender or through online research, to determine if they have a positive reputation in working with borrowers.
Our reverse mortgage experts at Longbridge Financial will take the time to explain all our products to make sure you have a choice in the best reverse mortgages for your needs.