Buying a Home with Your Reverse Mortgage- It’s a Reality!

Buying a Home with Your Reverse Mortgage-Its a Reality- 150x150Once you reach retirement and old age, you might find that your current home is not suitable for your age, and consider buying a new one. Being retired and on a fixed and probably fairly low income can interfere with your plan of buying a new home. Lenders look for good credit scores and incomes when giving out mortgages and most people over 62 simply cannot qualify. Fortunately, reverse mortgages, which have become very popular lately, will allow you not only to tap the equity in your home and receive a nice amount of much needed money, but to also buy a home.

The United States Department of Housing and Urban Development (HUD) started to allow seniors over the age of 62 to use a reverse mortgage for the purchase of a home. The Home Equity Conversion Mortgage (HECM) for Purchase Loan is insured by the Federal Housing Administration and allows people who are 62 or older to use the equity from the sale of a previous home to purchase their next primary residence.

Using a Reverse Mortgage to Make a Home Purchase

Most people who use a HECM for Purchase Loan do it in order to find a home that would be better for someone who is old. The home that you live in might be too large, so cleaning it would be a burden, or hiring someone to do the cleaning may be too expensive. Bigger homes also mean larger utility bills, which can also be a financial burden. If your home is in an area that is too far from where your family and friends live, you might have another reason to move into a new home. Also, because you won’t have to make monthly mortgage payments, you get to enjoy your hard-earned savings without the stress of having to make a large payment each month.

Using a reverse mortgage to purchase a home comes with a few requirements. Here’s what you need to keep in mind before applying for a HECM for Purchase Loan:

  • To qualify for a reverse mortgage, the youngest person on the title of the home must be 62 years or older.
  • The home that you are purchasing must be your primary residence and must be occupied within 60 days of the loan closing date.
  • Your new home purchase must be a single family home or a condo that is approved by the Federal Housing Administration (FHA).
  • If the reverse mortgage loan doesn’t cover the price of the new home, the rest must be paid from qualifying sources, such as money from the sale of your previous home, or your savings.
  • This type of loan can only be used for a home purchase, and cannot be used for the construction of a new home. However, the HECM for Purchase Loan can be used to buy a newly constructed home, as long as the home is approved for occupancy.

Seniors who wish to take advantage of this type of loan can choose between the standard and the saver version, with either a fixed interest rate or an adjustable one. The saver version of the loan features lower upfront costs, but less money can be borrowed, so most people will choose the standard version of the HECM for Purchase Loan.

Buying a new home after retirement may seem difficult or impossible, but it can be done with the help of a reverse mortgage. However, before taking this step, you must ask yourself why you want to do this and, if the reason is strong enough, make sure that you qualify and can afford to pay the difference between what you borrow and the price of the home from your own pocket.

Reverse Mortgages – Not the Smart Investment You Thought They Were

Reverse Mortgages-Not the Smart Investment You Thought It Was- 150x150Being retired doesn’t mean that you don’t need a good source of income anymore. Utilities, food, gas, and pretty much everything continues to become more expensive each year. The large majority of seniors have limited incomes, so they will be the most affected by these increasing expenses.

One choice that retirees who need cash have is to take out a reverse mortgage. Reverse mortgages are pretty popular right now, and a good alternative to other loans, but they might not be such a smart investment. Yes, reverse mortgages can provide you with that extra income, but, as an investment, a reverse mortgage is a poor choice.

What is a Reverse Mortgage and How Does It Work?

A reverse mortgage is a type of loan which is only available to seniors over the age of 62, and which uses the equity in the borrower’s home as collateral. This loan is designed to help home owners who are in or near retirement and have limited incomes. The borrower’s existing mortgage will have to be paid off in order for him or her to qualify for a reverse mortgage, and there are no credit score requirements. The money borrowed through a reverse mortgage can be used for many things, such as paying off other debt, medical bills, or paying for utilities and food. There are pretty much no restrictions to how a borrower can use the reverse mortgage proceeds.

The borrower can choose to receive the money from a reverse mortgage in three ways: as a lump sum of money, meaning that the borrower receives all the money at once, as a monthly payment for as long as the borrower lives or until the home is sold, or as a line of credit which is similar to a credit card. If the borrower chooses to, the money can be received as a combination of these three methods.

A reverse mortgage can be expensive because there are no standard charges, so the fees will depend on the lender and type of loan. The borrower will have to pay a mortgage insurance premium, monthly lender fees, and several closing costs. The amount that you can borrow depends on which method you are using to take out the money, how much equity is in your home, and the borrower’s age.

Why is a Reverse Mortgage Not a Smart Investment

A mortgage is considered a good investment only when you live in a home for a long time. When taking out a reverse mortgage, you can turn it into a good investment by living in the home for over 5 years, but the odds are stacked against you at that age. If you become ill and have to move into a nursing home, the monthly reverse mortgage payments will stop. Also, taking the whole amount out at once can turn ugly if you are unable to manage your finances properly. Once that money is gone, you won’t be able to take out another reverse mortgage.

Reverse mortgages also have high closing costs and other fees to pay. Because the lender doesn’t require you to have a certain income or credit score, he must take certain precautions to ensure that he doesn’t lose money, so your interest rate and fees will be higher than on a regular mortgage.

Also, after you die, your heirs will probably have to sell the home in order to pay off the debt, so they will be left with very little or nothing. If you decide to move out at a certain point after taking out a reverse mortgage, you will have to pay off the debt, and this might prove difficult at a time when money is tight.

A reverse mortgage can be a life saver when you truly need it, but it is not a great investment. An alternative to taking out a reverse mortgage and leaving your heirs with debt would be to reorganize your budget, or even ask your children for help. The high cost and the problems that may arise if you wish to move out of your home or leave it to your heirs can make reverse mortgages something that you are better off avoiding.

You Can Borrow How Much with A Reverse Mortgage?

You Can Borrow How Much with A Reverse Mortgage- 150x150Reverse mortgages are a way for seniors over 62 to receive much needed income. Home owners over 62 can take out money from the equity in their home, without having to pay back the loan until they pass away or sell their home. The money from a reverse mortgage can be used for pretty much anything – traveling, medical bills, or home repairs.

The sum of money that you receive from a reverse mortgage is not taxable and can be in the form of a lump of cash, monthly payments, or a line of credit, which can be used much like a credit card. After the borrower dies or sells the home, the reverse mortgage loan will have to be paid back with interest, usually by the borrower’s heirs.

How Much Can You Borrow?

There are several factors that are taken into consideration by the lender when deciding how much you can borrow. The most important is the value of your home, followed by age, current mortgage rates, and lending limits, if applicable. The maximum limit for a reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is $625,500. Private lending companies also offer reverse mortgages, which may have a higher maximum limit, but their loans will not be insured by the Federal Housing Administration (FHA). The general idea is that the older you are, the more your property is worth, and the lower the current interest rate is, the more you will be allowed to borrow.

How much you can borrow also depends on how you wish to receive the payouts. You can choose to receive all the money at once, in a single large payment, which would be useful if you need money for medical bills or repairs. Alternatively, you can choose to receive the money as monthly payments, which is helpful if you only need money for month to month expenses, such as bills. Also, you can choose to use the money from the reverse mortgage as a credit line, mostly useful when you have unexpected expenses.

If you choose to receive the whole amount at once, the interest on the loan will increase quicker than the other choices. If you choose to receive monthly payments, you will keep receiving them until you die, even if the total amount will be higher than the value of your home. When choosing to use the money as a line of credit, the unused funds will increase annually, meaning that you will gain access to larger funds as the years go by.

A reverse mortgage is a blessing for seniors who need money and don’t have a good source of income. The maximum limits are high enough to accommodate most senior borrowers, and they won’t have any trouble borrowing the money because there are no credit requirements and monthly mortgage payments due. The amount that you will be able to borrow is related to your age, home value, interest rate, and payout type, but you can quickly get an estimate by using an online reverse mortgage calculator or by simply consulting with your reverse mortgage lender.

Want a Big Cash Payout? Don’t Look to Reverse Mortgages!

Looking for a Big Cash Payout- Don't Look to Reverse Mortgages- 150x150One of the most attractive options for seniors who needed a large lump of cash was the standard fixed rate Home Equity Conversion Mortgage Loan (HECM) offered by the Federal Housing Administration (FHA). This type of reverse mortgage was designed to help senior home owners who are in need of a large sum of money especially for things like medical bills.

This type of loan, sometimes in the hundreds of thousands of dollars, is responsible for most defaults associated with reverse mortgages, so the Federal Housing Administration will no longer allow senior borrowers to get a fixed rate on HECM reverse mortgages. The only reverse mortgage loan that will come with a fixed-rate option is the HECM Saver loan, which has a much lower borrowing limit than the standard HECM loan.

What is the Home Equity Conversion Mortgage?

The Home Equity Conversion Mortgage is a type of reverse mortgage insured by the Federal Housing Administration. The HECM reverse mortgage allows senior home owners over the age of 62 to convert the equity in their property to cash. Factors that affect the size of the loan are the borrower’s age and the appraised value of the home.

Unlike conventional loans, which have strict lending requirements, HECM loans are given out without a credit check, and the money doesn’t have to be paid back until the home is sold or the owner dies.

Why Was a Change in Reverse Mortgages Necessary?

The large increase of reverse mortgage defaults has determined the Federal Housing Administration to stop giving out fixed-rate standard HECM loans. Back in 2012, 10 percent of the mortgages insured by the FHA were in default, an 8 percent increase over a decade ago. The FHA is looking at an estimated loss of $2.8 billion, which may force them to ask for a bailout from the federal government.

Reverse mortgages are great for seniors who need quick access to money for medical bills, but sometimes these loans are as high as a few hundred thousand dollars. Borrowers end up spending the whole amount too soon and defaulting, or not having enough money to pay for their property taxes and homeowners insurance.

Reverse mortgages are not for everyone. Seniors who don’t have access to cash, but live in an expensive home can better take advantage of this type of loan. However, reverse mortgages come with high closing fees and high interest rates, so they shouldn’t be your first choice even if you easily qualify. Many seniors took out a reverse mortgage loan because it seemed attractive, but ended up in default because of poor money management and not paying close attention to all that this type of mortgage loan entails.

Reverse mortgages have always been a great choice for a certain type of borrower. Now, with the change to interest rates, they will most likely decrease in popularity. Before going this route, you should look into a conventional loan first, make a careful comparison between your options, making sure that you don’t end up defaulting and having to give up your home.

Delinquent on Your Reverse Mortgage? Here’s Help You Need!

Delinquent on Your Reverse Mortgage- Here is the Help You Need-150x150A large number of older home owners who have bought their home with a reverse mortgage are now facing foreclosure. Borrowers, age 62 or older, have the opportunity of converting part of the equity in their homes into cash, without having to worry about paying it back. When the borrower dies, his or her heirs have the option to sell the home and cash out the remaining equity, pay back the loan and keep the property, or refinance.

Not requiring a credit score makes applying for a reverse mortgage very easy for all senior home owners, but it also makes it very easy for them to become delinquent on their reverse mortgage.

What Is the Cause of Reverse Mortgage Delinquencies?

When applying for a reverse mortgage, borrowers have a few options: receive the whole amount at once, start a line of credit similar to a credit card, or receive regular monthly payments. On a conventional loan, when the borrower takes out a home-equity line of credit, he or she will be required to make monthly payments. Reverse mortgages don’t require monthly payments, but they will be due when the owner dies or the home is sold.

Delinquencies occur when the home owner is unable to pay property taxes and homeowner’s insurance anymore. Paying these property charges is especially difficult for home owners who choose to take all the money upfront on a reverse mortgage, leaving them with very little money for taxes and insurance in the following years. Another group of seniors, the younger borrowers, are at risk of becoming delinquent on their mortgages, according to Federal Housing Administration (FHA) officials, who have come to the conclusion that most delinquencies will occur in the first four years of the loan.

What to Do If You Are Delinquent on Your Reverse Mortgage

Lenders are required to give you free financial counseling if you are behind on your property tax and insurance. You should act quickly, because the next step after falling behind on your payments is to go into default, then be evicted. Unfortunately, many seniors don’t realize that there are programs designed to help them avoid becoming delinquent on their reverse mortgage, or simply fail to act on time, and end up losing their homes.

If you receive a notice from your lender, acting quickly is the most important thing you can do. If you can’t afford to pay your property taxes and insurance, talking to a financial counselor is very important, and could possibly help you get back on track, while keeping your home. If you have the money to pay your property taxes and insurance, then your first step should be to contact your lender and find out if you should send the money directly to the tax authority and insurance company, or if your lender has already paid what was owed on your behalf, in which case you should send them your payment.

Losing a home is a very unpleasant situation, no matter what your age is. Unfortunately, because they don’t work anymore, seniors who take out a reverse mortgage are at a greater risk of running out of money, falling behind on their property tax and homeowners’ insurance payment, and eventually lose their home. However, with the help of several programs, senior home owners can get the counseling that they need in order to get back on track with payments, and avoid losing their homes.

Reverse Mortgage Loan Rates: Fixed vs. Adjustable

Reverse Mortgage Loan Rates- Fixed vs. Adjustable-150x150A reverse mortgage is a type of mortgage loan which is available to seniors over 62 years old. Reverse mortgages allow the qualifying home owner to convert part of the equity in the home into cash. The reverse mortgage loan is only paid after the home owner dies in one of three ways: the heirs pay back the loan, the home is taken by the lender, or the home is sold by the heirs, who can cash out the remaining equity this way. The mortgage on the home must be low enough to be covered with the money received from the reverse mortgage, and there are no income or credit score requirements.

The money received from the reverse mortgage loan is not taxed and can be used at the discretion of the borrower. The amount of money that can be taken out is determined by the property value, the borrower’s age, the interest rate, and the type of loan, fixed or adjustable rate.

Fixed vs. Adjustable

Determining which of the two types of reverse mortgage loans is best for you depends entirely on your reason for wanting to take out a loan. If for example, you wish to pay off your mortgage, you will most likely take out a fixed-rate reverse mortgage loan, which allows you to receive the whole borrowed amount at once. If you need the money for repairs, improvements, or other things, you can choose to take out an adjustable-rate reverse mortgage loan, in which case you will receive an amount of money each month for as long as you live in the house. The amount that you can borrow for both types of reverse mortgage loans is determined by the age of the youngest borrower.

Besides the age of the youngest borrower, several other factors are used in determining how much you can borrow. The value of the home and current mortgage rates also come into play when determining the amount of money that you will be able to get, whether you are taking out a fixed or an adjustable-rate reverse mortgage loan.

The rates on your reverse mortgage loan are calculated according to the London Interbank Offered Rate (LIBOR) index, which is the rate that banks lend to each other. A margin is added to this rate by each lender. Margins can differ slightly from lender to lender, but even a small, less than 1 percent difference can mean a lot of money over time.

Advantages and Disadvantages

The main advantage of a fixed-rate reverse mortgage loan is that the interest rate will remain the same for the duration of the loan, and interest rates are really low at the moment. The disadvantage of the fixed-rate reverse mortgage is that you must receive the whole amount and, while this doesn’t sound like a problem, you will be charged interest for all of the money.

Another advantage with an adjustable-rate reverse mortgage loan is that it is very flexible. You can take out what you need, then pay it back, and take out more money when needed. The disadvantage, as with all adjustable-rate mortgage loans, is that, due to the economy increasing, there is a good chance that the interest rates on your loan will increase.

Choosing between a fixed-rate and an adjustable-rate mortgage loan largely depends on what you need money for. If you need a large amount of money, then fixed-rate is the best choice. If you need a monthly check, then adjustable-rate is by far the best choice. Interest rates will change for the adjustable-rate reverse mortgage, but it is not the only factor that should matter when deciding which type of loan to choose.

Top 10 Steps to a Reverse Mortgage

reverse-mortgage-loans-150x150By retirement age, most people will have gone through the mortgage process at one point or another. The mortgage obtained would have been either to obtain a new home, lower a current mortgage rate, take out cash as a result of home equity, or to reduce the term of an old mortgage. At retirement age, a person is finally eligible for a reverse mortgage. Read on to discover the advantages of a reverse mortgage and how to get one.

Advantages of a Reverse Mortgage

  • Tax free cash. A reverse mortgage is not a lump sum or additional income. A reverse mortgage borrower therefore enjoys tax-free cash.
  • No default risk. Unlike other mortgage loans where you risk losing your home and other assets by virtue of default, you could only lose your home if you default on the home equity loan. The lender has no right whatsoever over your assets.
  • Federal insurance cover. The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM). It is federally insured; you still continue to receive your cash payments even if your lender defaults.
  • Home ownership is retained. Unlike other mortgages where the lender maintains the ownership title, you retain the ownership title yourself. You can therefore live there all the time, make changes to the home’s appearance and structures or even sublet some rooms depending on the terms of the lender.
  • Flexible payment options. Depending on your cash needs and financial circumstances, you get to choose how you would like to receive cash payments. You can receive the cash as a lump sum, as a credit line, as an annuity or a combination of the last two methods.

The Steps to a Reverse Mortgage

Basically, the major step towards a reverse mortgage is deciding whether you need one or not. If the advantages it offers are attractive to you, then don’t procrastinate further. These are the steps to a reverse mortgage:

  1. Conduct detailed research on reverse mortgages. Obtain thorough information related to reverse mortgages on the web. If you receive unsolicited invitations, then don’t respond to them because they could be scams. Look to your friends, family members and acquaintances for tips who may have taken reverse mortgages before.
  2. Compare quotes. There are several lenders who will definitely make attractive offers. Compare all of the quotes from these lenders. With the help of a mortgage calculator, find out how much you need to repay monthly without straining your income sources. Pick the lenders with the most competitive rates.
  3. Consult potential lenders. Once you’ve narrowed down the list of potential lenders further, consult necessary resources so that you are sure about the most appropriate lender. For instance, you could find out whether they are registered by the National Reverse Mortgage Lender Association (NRMLA) or the Better Business Bureau (BBB) and whether they are approved by the FHA. Don’t forget to check the testimonials from previous borrowers.
  4. Inquire about all terms and conditions. If you want a HECM reverse mortgage then you should opt for the best terms and conditions because these vary from lender to lender. These include interest rates, credit score qualifications and closing costs, among others. Narrow down to a single lender with the most suitable terms and conditions.
  5. Apply for reverse mortgage. Furnish the lender with your application done in person. The documents which may be required include proof of age (ID card or Driver’s License), proof of your Social Security Number and a copy of your homeowners’ insurance cover. Where applicable, you may also be asked for a complete copy of the family trust, a copy of the power of attorney, an original death certificate and a statement of any mortgages on property. Review your application forms carefully before submitting them.
  6. Get counseled. One of the requirements of HUD is that any reverse mortgage applicant be counseled by a HUD-approved third party. You can choose to attend the counseling session via phone or in person. Loan processing will not commence until you’ve obtained a signed certificate from the counselor. You may attend the training session in advance even before applying for the loan.
  7. Inspect and obtain an appraisal report of the home. With your application forms and counseling certificate, you can now have an appraisal done on your home. The lender will refer you to an FHA-approved appraiser to furnish you with a detailed appraisal report. It is advisable that you are available during the appraisal process so that you make any inquiries and answer any questions from the certified appraiser.
  8. Loan underwriting. Your loan must be underwritten by an underwriter who is approved by FHA. The lender will refer you to an underwriter.
  9. Close the deal. Once underwriting is done, you will arrange a meeting with the lender to finalize the deal. It is important at this stage to review all your application forms once again in order to confirm that all the information you submitted is correct. Confirm all the terms and conditions once again just to be sure of what you are committing to. You can then sign the papers and close the deal. You have three business days after signing the deal to change your mind if you think otherwise—referred to as the rescission period.
  10. Obtain the funds. Once the deal is sealed you will receive the funds. You can choose to receive the funds as a lump sum, a monthly fixed payment, a line of credit or a combination of the last two methods as you deem fit. You can use the cash to pay off your mortgage and any other existing loans as it suits you.

The maximum lending period for a reverse mortgage is 15 years. Re-evaluation of your property will also be taken once every 5 years of the term of the loan. Compared to other loans, this is one you should almost certainly take advantage of!

The Drawbacks of a Reverse Mortgage

reverse mortgage drawbacks- 150-x150The greater part of this country’s senior population has a great deal of their wealth and security locked up in the equity of their homes. The current economic stalemate has played a role in affecting the financial stability of every sector of the consumer demographic, including these aging constituents as well. If they, along with everyone else, are struggling to meet their monthly expenses, or simply keep up with medical costs, tapping into that equity with a reverse mortgage may often be the only solution. However, while the reverse mortgage does have important benefits that allows borrowers access to much needed cash, the program does have some disadvantages to consider over the long term. And, while there are no basic restrictions on how a consumer may use their reverse mortgage earnings, they may not be for everyone. Be sure to learn how a reverse mortgage works to see if this might be an option for you.

Consider This Before Pursuing a Reverse Mortgage

Low-Income Assistance – If a potential borrower is presently, or soon to be entitled to low-income assistance through federal or state government programs like Medicaid, there is a possibility that the proceeds from a reverse mortgage may disqualify the borrower from eligibility. Currently, Social Security and Medicare are not subject to this restriction.

Plans for Relocation – A principal stipulation of a reverse mortgage is the mandatory requirement that the borrower maintain the loan-collateralized home as the primary residence. The loan balance becomes fully payable if the borrower decides to relocate. In addition, the initial closing costs and insurance premiums of a reverse mortgage are much higher than a standard mortgage, which negate any benefits if the borrower relocates too soon within the term of the loan.

Long-Term Obligations – A reverse mortgage comprises a loan of the funds borrowed, along with the fees, closing costs, and interest. This loan balance grows for as long as the borrower continues to reside in the home, which means if the borrower sells or relocates, the loan balance will be more than was borrowed originally. In addition, all taxes and insurance must be maintained, along with all upkeep and improvements to the residence for the entire term of the loan program.

If after reading this article you still think a reverse mortgage might be your best option, you need to start preparing for the process of obtaining a reverse mortgage.  First, we suggest reading up on what you should know about reverse mortgage interest rates. Then, take a look at our list of the top lenders for reverse mortgages. With this information, you will be well-prepared and ready to get started with the lender of your choice.

Top 10 Reverse Mortgage Lenders

Reverse MortgageSince being introduced in 2001, reverse mortgages have been allowing senior citizen home owners to take advantage of the equity in their home and receive a cash payment or a line of credit. Most reverse mortgages, also known as Home Equity Conversion Loans (HECM), are insured by the U.S. Department of Housing and Urban Development (HUD), who supervises reverse mortgage terms and requirements. While HUD doesn’t make the loan, it makes sure that the borrower is protected in the event that the lender is unable to make the reverse mortgage payment or if the home value has decreased so much that the loan balance cannot be paid.

If you’re still asking yourself: What is a reverse mortgage? Click here!

Considering a Reverse Mortgage Lender- What to Look for

  • Types of reverse mortgages offered. There are three types of reverse mortgages. The federal-insured reverse mortgage, more commonly known as Home Equity Conversion Loan (HECM), doesn’t have many requirements, but has a higher upfront cost. The single-purpose reverse mortgage, which is low-cost and geared towards people with lower incomes, can be used for specific purposes, like home improvements and repairs, or for paying property taxes. The third kind of reverse mortgage is the proprietary reverse mortgage, which is a loan offered by a private company.
  • Fees. Reverse mortgage costs, especially Home Equity Conversion Loans, can end up being very costly. Insurance premiums, origination fees, title insurance, and other fees can be as high as a few thousand dollars, so finding a reverse mortgage lender that will disclose and explain the overall cost of the loan before signing a contract is very important.
  • Interest rates. Reverse mortgage lenders usually only offer adjustable-rate loans, but some also offer fixed-rate loans. Interest rates for reverse mortgage loans are lower than the ones for conventional loans. If several lenders offer you the same interest rates, it’s always best to go with the one that is the most informed and easy to work with.
  • Accreditations and ratings. While many legitimate and trustworthy lenders are not members of the National Reverse Mortgage Lenders Association (NRMLA), choosing a reverse mortgage lender that is a member will give you more peace of mind. Members of the NRMLA must conform to a strict code of lending ethics, meaning that there is a much bigger chance that they will be reliable. A good lender will also have a good rating on websites like the Better Business Bureau (BBB), where you can also learn of any complaints against the company.

Before applying for a reverse mortgage, seniors must be aware that, while this type of loan has its advantages, it also comes with some downsides. Once you understand the whole reverse financing process and decide that it is the best choice in your situation, you need to start searching for the reverse mortgage lender that will best satisfy your needs. Here are the top 10 reverse mortgage lenders that will offer you the best balance between a good deal and a hassle free experience:

Top 10 Reverse Mortgage Lenders

  1. Liberty Home Equity Solutions. Formerly known as Genworth Financial Home Equity Access (GFHEA), this company was founded in 2003, and has since helped improve the lives of over 27,000 seniors. Liberty Home Equity Solutions has more than 450 associates in the U.S., and is one of the largest reverse mortgage lenders in the country.
  2. Security One Lending. Licensed in 40 U.S. states, Security One Lending (S1L), launched its business back in 2006, and today it is recognized as one of California’s best reverse mortgage lenders. In 2011, actor Pat Boone became S1L’s celebrity spokesman.
  3. American Advisors Group. AAG (American Advisors Group) is one of the nation’s leading reverse mortgage lenders. Better Business Bureau (BBB) gave the company an A+ rating, and AAG is approved by U.S. Department of Housing and Urban Development. American Advisors Group has over 450 employees, and it is licensed in 43 U.S. states.
  4. One Reverse Mortgage. According to the 2012 U.S. Department of Housing and Urban Development (HUD) HECM Endorsement Summary Report, One Reverse Mortgage is America’s largest Home Equity Conversion Mortgage originator. A Quicken Loans company, One Reverse Mortgage was founded in 2001, and employs over 250 persons dedicated to providing quality services to senior clients.
  5. Generation Mortgage Company. This privately held company launched its business in 2002 in Atlanta, Georgia.  Generation Mortgage Company is accredited by the Better Business Bureau, and is an approved Ginnie Mae issuer.
  6. Urban Financial Group. Founded in 2003 in Oklahoma, Urban Financial Group is licensed in the following states: Oklahoma, Colorado, Illinois, Indiana, Kansas, Michigan, Missouri and Wisconsin.  The “Reverse it!” division of Urban Financial Group is the largest provider of wholesale reverse mortgage loans.
  7. Proficio Mortgage Ventures. Headquartered in Florida, Proficio Mortgage has been providing mortgage solutions to the elderly for the last 8 years. The company is licensed to work in 49 states, and it is a subsidiary of Proficio Bank.
  8. Reverse Mortgage USA. Since 2003, Reverse Mortgage USA has been a member of the National Reverse Mortgage Lenders Association. The company is considered the top reverse mortgage educator in the country.
  9. Cherry Creek Mortgage Co. Established in 1987, the company has over 600 employees that provide lending services to thousands of clients. Cherry Creek Mortgage Co. (CCMC) provides reverse mortgage loans through its division, 1st Reverse Mortgage USA since 2004.
  10. NewDay Financial. NewDay Financial is one of the country’s top mortgage lenders. The company was established in 2002, and received its BBB accreditation the same year.

Moving Forward with Your Mortgage

A reverse mortgage loan is a good choice for seniors over 62 who don’t plan on moving into another home in the next two to three years. While it may feature a higher cost with a few risks, under the right circumstances, with the help of professional financial counseling, and by using a good lender, a reverse mortgage loan can be an excellent option for you. For more information, contact a qualified reverse mortgage specialist before proceeding. It never hurts to get more than one quote to make sure you are getting the best deal possible!

Reverse Mortgage – How Does a Reverse Mortgage Work?

While the most recent economic downturn has most homeowners wondering where the market will decide to turn regarding their overall sense of financial security, the previous four decades have nonetheless shown a strong and stable rise in the value of the country’s housing portfolio. In broad terms, a significant portion of the population have resided in their current homes for quite a while, and have subsequently reaped a good amount of equity build-up as a result. As the overall age of this demographic sector advances, specifically those who are in or approaching retirement age, many find themselves with not as much savings to fall back on as once hoped. Combine this with having access to only moderate means or sources of available income, this equity represents a large share of their accumulated net worth.

Reverse MortgageMany consumers are exploring the numerous options in the lending market to access this yet untapped asset. The more conventional methods are home equity lines or refinancing their existing mortgages, to name a few. However, should monthly payment obligations or low income resources be a factor, these options could be difficult for an older borrower to qualify for. For those in the population pool that are moving toward the golden years of life, and would like to seek out another very popular concept making its way into the realm of financial possibilities, the answer might be a reverse mortgage.

What is a Reverse Mortgage?

In this broad summary, the loan option referred to as a reverse mortgage takes it’s definition and characteristics from its very name – in simple terms, it is the exact reverse process of a standard mortgage loan. It is a lending mechanism that permits a homeowner from the age of 62 years or older to tap into the equity of their home. It becomes the means to provide the homeowner with access to either a large ‘lump sum’ source of cash, or, a way to create a comfortable source of tax-free monthly income.

With a standard type of mortgage program, the typical borrower is obligated to maintain a monthly repayment schedule back to their lending source in order to repay the funds that were originally provided by the lender to either buy or refinance the home. Naturally, these repayment amounts include the interest applied to the loan in the approval and closing process. The loan procedure making up the reverse mortgage process is just the reverse. In this case, the lender provides the monthly payments to the homeowner. In addition, the home is used as security or collateral for the loan amount by the lender in a reversed mortgage, just as it would be in a standard type of mortgage.

Reverse Mortgage Funding Options

Getting FundedThere are certainly some key aspects in the reverse mortgage program that determine exactly what amount and what type of funding is available from a loan of this kind. Primary factors such as the value of the existing home are most important. The higher the market value, the higher the loan amount. Another factor is the borrower’s current age, along with a co-borrower’s age if applicable, and generally, the older a borrower is, the more funds will be available. The mortgage interest rates will be a factor as well, and will play the usual role in the funding decision as they do in a standard mortgage – the lower the rates, the more loan a borrower has access to. Geographical area also plays a role in the lending equation, and state and federal guidelines will determine if there are specific lending limits required.

There are three types of reverse mortgage funding guidelines a homeowner can decide upon based on their specific income needs. As mentioned, the first is the lump sum arrangement to allow the most access to the most cash all at once. The next option is the setting up of a monthly payment income stream. This option has two variables. One is to schedule the payments for a fixed time period, called a term type, or, until such time that the borrower (or borrowers) no longer resides in the home, called a tenure type. The third option is when borrowers can choose to set up a line of credit to draw from, accessing the funds as they need them. Almost two thirds of the borrowers who utilize the reverse mortgage concept choose the most popular line of credit option.

The Fine Print on a Reverse Mortgage

Based on the loan proceeds, there are indeed interest charges that will be accumulating on the funds that are withdrawn. However, there will be no monthly payments to be made on the loan. Also, the balance on the loan must be paid off at such times as the borrower either moves or sells the residence, or passes away, or if the ownership of the residence transfers to another individual. In addition, should the sale price of the home exceed the mortgage balance, the difference stays in the hands of the owner or is transferred to the heirs of the estate.

An additional stipulation is that at such time as the present mortgage is completely paid, this being a mandatory requirement, the funding issued with the reverse mortgage can be utilized for any purpose the borrow may need, whether for home improvements, medical expenses, or other debt consolidation. Reverse mortgages are an option for generally all types of property, though there are state-sanctioned guidelines with respect to co-ops. These reverse mortgage programs are federally insured private loans, and are provided through the U.S. Department of Housing and Urban Development (HUD), and handled through the auspices of the Federal Housing Agency (FHA).

The guidelines require that every potential borrower must receive assistance or counseling from a HUD approved agency before proceeding with the loan application. The counseling is necessary to ensure the terms and risk factors of the program are completely clear. Counselors are mandated to review all of the implications of the reverse mortgage program and each of its potential options. For every home-owning member of the senior demographic considering the advantages of living the stress-free retirement way of life, then the reverse mortgage can be a very rewarding and financially sound means to achieving that goal.