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Revere Mortgage Facts No One Wants You to Know
Top Facts on HECM Reverse Loan 2018.
Here is an overview look at the top facts of the HECM program:
§ no credit score or income required unlike a traditional forward mortgage
§ you keep ownership of the home not the bank
§ must be 62 years or older to qualify
§ risky if both borrowers are not 62 as the younger will be left off the loan – thus if the qualifying borrower passes away it can cause the loan to come due and payable
§ never have defaulted on government debt/loans in order to qualify
§ if you do not pay your taxes or home insurance you can be foreclosed on (this is the case even if you don’t have a reverse mortgage on your property this is mandatory for all)
§ if you select a fixed rate option the interest rate will be fixed for the life of the loan
§ if you select an adjustable rate and eventually rates increase your rates will increase along with the market rates – HUD has plans to eliminated the HECM standard fixed rate so consider getting a reverse mortgage now if you wish to receive a lump sum with a fixed rate (you can get a reverse mortgage quote here)
§ you must pay out of pocket for an appraisal ($350-$450)
§ you must pay out of pocket for a third party counseling session ($50-$100) – we are able to find some counselors which are free so give us a call
§ the income you receive is never taxed – any money you receive from your equity will not be imposed to state/federal income laws.
§ you have 3 days from closing to cancel a reverse mortgage
§ if the home increases in price then that equity is yours (if the home decreases in price you are not responsible for the loss in equity – the FHA insurance will cover this if for any reason the home is worth less when it is sold compared to the outstanding loan – so your heirs wont have to pay either)
§ the loan is completely safe – some 600k+ seniors have taken one before you over the last 22 years +
§ costs have come down considerably from a few years ago (not to mention rates are historically low right now) so that it compares to your other options for tapping the home’s equity in your retirement (selling home, refinance, HELOC, home equity loan, downsizing would all cost about the same to do as a HECM reverse mortgage) and some are not so retirement friendly as there are payments to make.
Banks, Lenders, Brokers have the responsibility to educate senior homeowners just like you about the in’s and out’s of the reverse mortgage loan. Their work is to not only represent their institutions interest but to make sure you are aware of how the reverse mortgage works. The reality is that the loan officers and brokers at these institutions are biased since this is how they make their living by writing making these loans in the first place, so we have gone ahead and decided to write up an unbiased article covering the real facts of the HECM reverse mortgage program. Since we are not a bank or lender we can cover all the juicy news/gossip/misconceptions/myths as well.
“Lets have a closer look at some insider tips and hidden facts which most banks/lenders do not fully explain to borrowers or don’t want you to know about. The reverse mortgage is a safe loan, it is insured by our government, and also monitored heavily to insure the borrowers safety, but it is not the right solution for every senior – and at times there may be better alternatives or cheaper options to consider. ”
In order to to secure a reverse mortgage loan one of the steps in the process is to attend a HECM counseling session (which you pay for) to have any questions answered by a third party counselor (they do not work for the lender) therefore you can also ask any questions you like or if you have concerns they will be able to explain to you how the program works. The goal here is to get all the facts then apply them to your specific case as each persons financial plans/situation is different.
1.) With a reverse mortgage you are responsible for both the property taxes and insurance.
There should be no confusions as to who is responsible for making those payments, and the consequences if payments are not met. You as the borrower need to make sure you have enough income to pay for both the property taxes and insurance, if you fall behind and default on those payments you are at risk of the bank calling the loan due and beginning a foreclosure process. This is the case if you have any other type of mortgage and it not only applies to reverse mortgages – the main advantage to the reverse mortgage is that there are no monthly mortgage payments to make to the lender but taxes/insurance always have to be paid for by the borrowers. Do not trust any lender that tells you otherwise and budget this carefully into your retirement plans as it is a cost that wont go away.
*** With a reverse mortgage there is never risk of regular foreclosure as there are no payments that need to be made on the mortgage – only risk of foreclosure when you ignore the taxes and insurance – but this would happen even if there was no reverse loan on the home as those payments are necessary to the state/county.***
2.) By comparison shopping you secure a better reverse home loan
Banks/Lenders/Brokers do not want you to know this but by comparison shopping you could be getting a better deal, sounds simple but many seniors feel obliged to do business with the first company they speak to or to any local banks they have an existing relationship with. Well the the thing is that this loan option can be costly if not compare – the difference in fees between lenders is in the many thousands so do not feel like you have to do business with anyone – the main goal here should be to compare as many HECM quotes as possible to get the best deal. Our free service is based around this idea that the more we can compare lenders the more chances of finding you better savings – we have working relationships with top banks nationwide as well as local brokers that can meet you face to face – our only goal is to save you as much money as possible when you consider the reverse mortgage. depending on market reverse mortgage interest rates we can even find a no fee reverse mortgage loan.
3.) Income, Credit, and Mortgage Payment History Matters does not matter to qualify
HUD has approved the ability for banks/lenders to review your financial ability to pay back the property taxes and insurance. Seniors will now have to go through financial underwriting which includes passing income score, income, and payment history requirement.
***updated Feb. 10th 2013 – the above does NOT apply – the only news we have from HUD is that the fixed rate standard program will be eliminated starting on April 1st 2013 – thus for those seniors who need to pay off a mortgage balance now is the right time to consider a reverse loan.***
4.) Home prices will mostly increase at historical rates providing you with more equity as you age in your home
Do not buy into the belief that the reverse mortgage is a solution for the poor or those who have not saved for their retirement, but instead understand that since you own your home and interest rates are currently at all time lows this is a great way to improve your retirement income while also allowing for the benefit of increased equity down the line. If your home increases at the historical average, it will offset any costs you incur as interest charges and thus allow you to either tap into more equity later on in your retirement or leave all the equity behind for your heirs/estate. Consider the downside risk of your home loosing most of its value, without a reverse mortgage you would just loose all of that hard earned equity – with a reverse mortgage the income your borrow is yours to spend without restrictions.
5.) But aren’t reverse mortgages really expensive?
This is another myth or another cause of all the bad media that has decided to trash the reverse mortgage program – to be honest it deserved all the negative attention since this used to be true back some 20 years ago. The new reality is that the federal government has worked hard to make sure this is a viable program for seniors who want to tap their equity in retirement without payments. With the introduction of the HECM Saver program the mortgage insurance premium had decreased from a 2% upfront fee to only .01% – the rest of the fees are very similar to a cash out refinance or home equity loan. The fact is that any option that you have to release your equity will be comparable if not more expensive than your options with a reverse mortgage loan – do your own homework always and compare the fees to see if this is true. We here are RMLD take this extremely serious and have built our company on the foundation of finding seniors a better deal on their reverse mortgages.