In the past, reports of predatory lending in the reverse mortgage industry tarnished the image of the FHA-insured loan. Common victims are unsuspecting seniors.
Today, reputable lenders such as Primary Residential Mortgage, Inc. request borrowers to get acquainted with the risks of reverse mortgage programs first before committing to a loan.
How a Reverse Mortgage Works
The loan allows homeowners to borrow using equity on their home equity. The borrower receives payments from the lender, instead of the other way around. Mode of payment can be any of the following:
Monthly payments for the entire time the borrower lives in the home
Periodic cash advances via a line of credit
Any combination of the above modes of payment
Reverse Mortgage Eligibility
Any homeowner aged 62 years and above with enough home equity is eligible for the loan. Qualified borrowers can expect the following:
Payment of existing home loan/s.
If necessary, deferred repairs/maintenance will be required.
Credit history and FICO scores are not important.
Cost of Reverse Mortgages
Just like regular loans, reverse mortgage programs come with fees. You can have these charges financed and rolled into the mortgage. Since no standard charges are applicable, fees vary depending on the loan type, lender, and third party vendors.
In general, borrowers pay for the following:
Monthly lender fees
Mortgage insurance premiums
Application fees or loan points
Normal closing costs
Amount of Loan
Loan proceeds depend on several factors. These include:
Type of loan chosen
Remaining equity after existing mortgages are paid off
The age of the borrower
Where to Get a Reverse Home Mortgage
Some lenders offer reverse mortgage packages. You can refer to the list published by the National Reverse Mortgage Lenders Association, sorted by state and approved lenders. You can also find lenders from the list released by the US Department of Housing & Urban Development.
The intention of a reverse mortgage is to provide seniors with financial security. If you are considering getting one, it is best to learn its basic features first to avoid confusion in the future.