We compare top HECM lenders.
“For seniors who need a way to tap into the homes equity without selling/moving or having a mortgage payment to worry about – the reverse mortgage is a viable option.”
There are many pros to a reverse mortgage:
· 1. Retire in the comfort of your own home
· 2. Pay off your existing mortgage - eliminate mortgage payments
· 3. Tax free income - no taxes on funds released
· 4. Choose how you receive the income/funds
· 5. Safe government insured program (access money in retirement)
· 6. Leave the home to your heirs or remaining equity
· 7. Heirs not responsible for your mortgage debt
· 8. Use the money how you want - no restrictions on spending
· 9. Quality of life in retirement
· 10. Easy to qualify - no income or credit scores needed
· 11. Include other debts into the loan - pay off any other debt
· 12. 2012 loan limit is at $625,000
· 13. No obligation to repay the loan
· 14. No payments due
· 15. Remaining equity belongs to your heirs
· 16. Reduced costs - lower fees in 2012
· 17. Lowest interest rates in history
· 18. Facing foreclosure? Reverse can help get out of foreclosure
· 19. Protects you against home prices falling
For more information do no hesitate to contact our friendly call center staff - calls are toll free (888) 975-1367
Reverse Mortgage Lenders Direct inc. or *reversemortgagelendersdirect.com does not offer loans or mortgages. *reversemortgagelendersdirect.com is not a lender or a mortgage broker and does not provide mortgage relief assistance. *reversemortgagelendersdirect.com is a website that provides information about mortgages and loans and does not offer loans or mortgages directly or indirectly through any representatives or agents. By submitting or completing to quote form on this page or any page on this webiste you are authorizing RMLD inc to validate the information. Contact our support if you are suspicious of any fraudulent activities or if you have any questions.*reversemortgagelendersdirect.com is not responsible for the accuracy of information or responsible for the accuracy of the rates, APR or loan information posted by brokers, lenders or advertisers. The actual mortgage rate you qualify for will depend upon the verification of the value of your home, your credit score and other considerations.
*reversemortgagelendersdirect.com is not associated with the government, and our service is not approved by the government or your lender.
ReverseMortgageLendersDirect.com 3000 NE 30th Pl, Ste 203, Ft. Lauderdale, FL 33306 888-975-1367
· 1. Not free to get a reverse - closing fees involved
· 2. Loan balance increases
· 3. Medicaid
· 4. Not tax deductible
· 5. You pay for property taxes & insurance
· 6.mandatory counseling - small fee
· 7. You pay for the FHA appraisals
· 8. Financial underwriting may turn into a reality
· 9. Time consuming to learn about the program
· 10. You must stay put or else can set off loan payment
In any situation in life we have to look at both the pro and cons, see which outweigh. Taking out a HECM loan is just another one of those situations; you have to ask your self whether the positives of the program outweigh the negatives. By looking at the facts you can see that there are a lot more pros than cons. The majority of people who are considering a reverse mortgage loan realize that this loan is quite special in that all the features were specifically designed for them and these are the folks who would tell you just how great this program is.
1. Retire in the comfort of your own home
The program allows borrowers to stay in their home (no need to sell/move). If you compare this to the “other” options you have in your retirement to access your equity – the HECM program is the only one that gives you access to the equity while allowing for you to live in your home with no mortgage payments. This unique feature is one of the main pros
2. Pay off your existing mortgage - eliminate mortgage payments
The HECM mortgage allows borrowers to pay of any existing mortgages on the home – therefore eliminating any current mortgage payments. As long as the homeowner lives in the property (has to be your primary place of residence) and meets the requirements for maintenance and paying the home’s property taxes and insurance, they will have NO monthly mortgage payments.
3. Tax free income - no taxes on funds released
The money you receive from your reverse mortgage is tax-free – so if you decide to release a portion of your equity from your home you will not pay taxes on this income/funds.
4. Choose how you receive the income/funds
The borrower will receive the payments on flexible terms; it is totally up to you the borrower. You can receive your income as either monthly payment, a lump sum, as a credit line or any combination of the above. There is also a choice of fixed rate or adjustable rates – having the ability to decide how to receive your hard earned equity is precious in your retirement – with the reverse loan you control you will spend and receive the money from your equity.
5. Safe government insured solution to access money in retirement
The program is insured by the federal government FHA (Federal Housing Administration) – this creates peace of mind knowing that the program is being monitored by the government and that there are no chances for the bank stop making payments or freeze your equity. In the 2008 mortgage meltdown many banks were cutting off credit lines as consumer credit scores dropped and home values dropped – this cannot happen as the reverse loan is insured by the FHA (this is one of the safest mortgage programs on the market as it has been designed for seniors in mind).
6. Leave the home to your heirs or remaining equity
You can leave your home to your heirs and any future equity that builds up belongs to you or your family/trust/estate. The reverse mortgage balance increases with time but so does the value of your home – when you take a reverse loan you will only have access to a portion of the equity roughly 50-70% so from the start there will be a portion of the equity there (in place for your protection and so that your legacy can remain even after you pass). When the loan becomes due your heirs/estate/trust will have the ability to sell the home and or refinance to keep the property.
7. Heirs not responsible for your mortgage debt
Your heirs with never be personally liable for your mortgage debt, therefore even in the worst-case scenario that your home value becomes less than the outstanding mortgage debts they will not be liable. Property values increase and decrease over time – therefore if the worst-case scenario happens and the home is not worth as much as you would have liked (and there is reverse mortgage loan) you do not have to worry about your heirs paying for you loan (the HECM is insured by the FHA).
8. Use the money how you want - no restrictions on spending
There are no restrictions on how you can spend your money – you are in the drivers seat. Remember there is no income tax or any other taxes place on your equity when you decide to release it – this is very important and gives you the borrower maximum flexibility with your hard earned equity. Whether you are looking to do home improvements, increase your retirement income, go on a vacation, the list is infinite and there are never restrictions placed on your equity income/funds.
9. Quality of life in retirement
This is your golden years, if you have worked hard it is now time to enjoy the fruits of your labor – whatever you define as a quality retirement the reverse mortgage can help it make a reality. Receiving extra income for life can improve the quality of your retirement. Having access to a credit can allow you to make needed home improvements and replenish your retirement funds. Being able to eliminate your mortgage with a HECM standard loan is a very unique aspect that can completely change the way quality of your retirement.
10. Easy to qualify - no income or credit scores needed
Requirements to qualify are pretty straightforward, you have to: own home, be aged 62 or older, and have never defaulted on government debt. If you read our quick introduction than you know that the other options all have some form of credit underwriting to go through – this is not the case with a reverse loan. Since the FHA backs the program and since it has been specifically designed for seniors in mind the program does not require you to have credit, income (those even with BK, close to foreclosure qualify).
11. Include other debts into the loan - pay off any other debt
The program allows you to include other debts into the loan (with sufficient equity), for example: credit cards, medical bills, car loans, and any other loan or personal debt you may have. Studies show that retiring without monthly mortgage payment or other bill payments can reduce stress, which increases quality of retirement. Also you have to calculate the interest savings that you can achieve by considering this option – if you have a car loan at 10%, credit card at 20% – any debt which is higher % than the actual reverse mortgage loan you can essentially consolidate into the reverse and save a lot of money in interest every year.
12. 2012 loan limit is at $625,000
This is the highest it has ever been; therefore you can borrow more of the equity tied up in your home. The loan limit can drop in 2013 and so many potential borrowers will not qualify. This limit means that if your home is worth $1million the real value that the banks will use is the limit to establish how much you can borrow – a higher limit means more equity you can release – as mentioned limits can decrease and this can impact your chances to quality.
13. No obligation to repay the loan
If you “outlive the loan,” or in technical terms receive more income than the home is worth, you will not have to pay that back. This is because you will never owe more than the value of the home (according to the Federal Trade Commission). Once the last living borrower passes, the home is sold or no longer lived in as a primary residence; there will be 12 months time frame after leaving the home that the loan is called or due. (So if medical conditions arise you have 12 months to return home).
14. No payments due
Once the last living borrower passes, the home is sold or no longer lived in as a primary residence; there will be 12 months time frame after leaving the home that the loan is called or due. (So if medical conditions arise you have 12 months to return home).
15. Remaining equity belongs to your heirs
After the home is sold and the loan/fees are paid back to the lender, any remaining equity in the home belongs to you or your heirs/estate.
16. Reduced costs - lower fees in 2012
In 2012 lenders have started to dramatically reduce closing costs involved with reverse mortgages, therefore giving you more of your equity. The HECM Saver has the lowest closing costs and insurance costs but you cannot receive as much equity. Depending when you are reading this we have even see a no fee reverse mortgage loan when the closing fees (origination fee) are waived or paid for in the interest rates. The main con about the reverse mortgage has always been the high upfront costs but with these changes seniors can now benefit from using the home equity while in retirement.
17. Lowest interest rates in history
Were you waiting for interest rates to drop – well they are now in historical low’s – interest rates for the HECM program are traditionally higher than forward mortgage rates – but with the current market conditions the Fed has maintained rates at historical lows to spark a refinance boom and allow those who have equity to release at the lowest cost in history. For more information about HECM rates -visit reverse mortgage rates
18. Facing foreclosure? Reverse can help get out of foreclosure
The reverse mortgage can be used as a tool to get out of pre-foreclosure or foreclosure. In some instances you can still receive a reverse mortgage even if you are in bankruptcy. You should consider this as an option if you have equity available in the home but have falling behind due to the payments – while not always the right solution to this problem if you have fallen on hard times (own your home and have equity and are 62+) you should have a review of the HECM loan in order to avoid the foreclosure process.
19. Protects you against home prices falling
If you lock in a loan today and take out the equity at a low fixed interest rate then there will be no risk if home prices drop as you will have locked in your current loan based on current home prices. (Long-term home prices will increase or so we expect them – but there will always be dips in the real estate market) Your goal as the homeowner is to protect your nest egg – you have worked hard to build the homes equity over time and while you are now in retirement your new job is to protect this equity (consider the reverse if you know that your home can continue to drop in value and you have a 1st mortgage which you can pay off). That strategy will reduce your risks – while maiming the upside potential (which is home prices increasing more equity for you or your heirs).
1. Not free to get a reverse - closing fees involved
Mortgages are expensive in general, the HECM program has reduced its fees tremendously over the years and with our free comparison service we will work hard to find you the best HECM loan. (The HECM saver reduces the fees substantially and some lenders are now no longer charging origination fee’s either). While a lot of the scenarios depend on the actual borrower the HECM loan can be pricier than a regular refinance (mainly since there is a mortgage insurance premium which is paid upfront) – if structured right you should not pay more to receive a reverse mortgage when compared to your other 4 options (no fees reverse mortgage). Also to keep in mind the features found in a reverse mortgage are unique no other loan offers those – at reverse mortgage lenders direct we love comparison shopping lenders to find you the best one.
2. Loan balance increases
Over time, the loan balance increases and the value of the estate or inheritance may also decrease. Essentially the reverse mortgage is adding the monthly mortgage payments back onto the principal of the loan (so you never have to make a mortgage payment but the actual loan balance is accruing interest and growing). We expect that your home will continue to increase in value at a normal pace which should keep up with the rate of the reverse mortgage – while this will not always be the case in the long term you will maintain the same amount of ownership in your home if you home can increase at roughly the same level as market rates (very likely in the long term.) Example – if you take out a credit line for $100,000 today and your home value is $200,000 you own 50% of the home (or 50% of the equity is still in the property right) if you are borrowing at 4% fixed – and your home maintains a 4% increase year over year then you will maintain that 50% ownership (even though your loan would increase your home value would also increase).
Medicaid and other need-based government assistance are affected if too much funds are withdrawn and not spent (in one month). On the plus side, neither Social Security nor Medicare is affected by the loan.
4. Not tax deductible
The interest on the home loan is not tax deductible until the loan is paid off.
5. You pay for property taxes & insurance
With the program you will be responsible to pay for property taxes and insurance. To be fair this is not really a con since either way you would have this expense – as long as you own the home you will have this expense with any other mortgage (4 options above for example) there is no way to avoid neither costs unless you are renting and do not own a home.
6. Mandatory counseling - small fee
Before getting a HECM loan, you will have to take part in a mandatory counseling program, this costs roughly $90-$150. Some may view this as a pro since it protects seniors, we also view this as a pro because a second opinion is great for when making a life long decision, the only reason it is listed as a con is because it does usually cost money to receive the HUD counseling (and since it is mandatory you are forced to pay for this minimal fee). There are some government-sponsored entities, which can do the mandatory counseling for free.
7. You pay for the FHA appraisals
You must pay the fee for the FHA appraisal services – this usually amounts to $350-$450. FHA appraisals are third part not chosen by the lenders to get the real value of the property. Lenders cannot argue the value of the home, as HUD implemented independent appraisers will appraise it. Due to the recession many of appraisals have been coming up short (due tougher standards which the appraisals are applied under FHA). Equity is the most important aspect to qualify for a reverse mortgage, so if you know that you are close to not qualifying (use our free reverse mortgage calculator).
8. Financial underwriting may turn into a reality
Some top HECM lenders are now implementing financial underwriting which makes it tougher for seniors to get a reverse mortgage (they are in test mode right now – so some lenders are just starting to test this features). Many will have to document their income and credit scores if dealing with these lenders. Currently still offer a no income any credit reverse, which is through out partner lenders who are all HUD, approved.
9. Time consuming to learn about the program
This is not the easiest program to understand – we get that – a con is that it might take you 10 hours or more to fully understand all the in’s and out’s of the program – since we are not a bank/lender/broker we would be happy to assist you (in giving you everything you need to know without any fees or strings attached). We are believers in the program but also understand that it is not for everyone and that there are cons, which should impact your final decision.
10. You must stay put or else can set off loan payment
With a reverse mortgage you must live in the home as your primary residence – you must maintain the home – if something happens to you and you go into a nursing home for 12 months or longer the bank can call up the loan. While the program is safe and insured by the federal government the loan has terms and conditions – one being that in order to keep in good standing you must not leave the property for 12 consecutive months – or else the bank may ask for repayment.
For even more information we suggest you review the following resources.