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The federally-insured reverse mortgage program was introduced over 20 years ago by the Department of Housing and Urban Development. This program, called the Home Equity Conversion Mortgage (HECM), has recently significantly increased in popularity because of the increase in homeowners over the age of 62. With the increase in demand has come a significant increase in the amount of reverse mortgage lenders. With so many reverse mortgage lenders to choose from, how can one be sure they are making the right decision?
What is A Reverse Mortgage ?
A reverse mortgage lender is there to advise their clients and make certain that they understand the product they are getting. This financial product is a unique type of home loan that allows a homeowner to liquidate a portion of the equity they have stored in their house. It is only available to homeowners over the age of 62 who live in their home as their primary residence. The most unique aspect of this type of loan is that there are absolutely no monthly mortgage payments required for as long as one homeowner lives in the home and maintains their obligations as a homeowner.
Reverse Mortgage Obligations
A reputable reverse mortgage lender will explain that because the homeowners always retain title to the home with this type of loan, there are certain obligations that they are expected to fulfill. These obligations include remaining current on homeowner’s insurance, real estate taxes, and home maintenance. Provided that these obligations are fulfilled, there are no monthly mortgage payments required.
Reverse Mortgage Lenders Should Encourage Counseling
Counseling with a HUD-approved counselor is a mandatory aspect of a federally-insured reverse mortgage. A reputable reverse mortgage lender should encourage borrowers to ask as many questions during this session as possible in order to make certain they are comfortable with the product being offered. Important to note, though, is that counselors are not reverse mortgage lenders and should only provide people with facts rather than their opinions.
Supplementing A Fixed Income is Possible
One of the most popular reasons people choose to seek reverse mortgage financing is to eliminate any existing liens on their property. After all liens on the property are paid off, there is an opportunity to access additional funds. Depending on the amount of equity the borrower has retained in their home, they will have the ability to access additional funds in several different ways. All reverse mortgage lenders should make their clients aware of the different disbursement options. These disbursement options include:
Lump Sum -This is a one-time disbursement where the remaining proceeds are disbursed. Recently, this has become the most popular option because it is based on a fixed interest rate which offers stability.
Line of Credit – This is similar to a Home Equity Line of Credit when the remaining funds are put into a line of credit that can be accessed at the homeowner’s leisure. Though this provides flexibility, it is based upon an adjustable interest rate which can be volatile.
Monthly Disbursements – Some people prefer that the funds be disbursed monthly. The payments can either continue for the rest of the time in the home or for a predetermined time, selected by the borrower.
Combination – This disbursement option allows the borrower to use any of the other options to customize a disbursement plan that fits their needs.
Reverse Mortgage Lenders
In order to begin the process and to obtain answers to any questions, contact a reputable reverse mortgage lender today.