[ad_1]
Photo: depositphotos.com
For homeowners over the age of 62, a reverse mortgage can provide two key benefits: freeing them up from mortgage payments and providing cash to pay for medical bills, home repairs, and other expenses. However, it’s important to work with the best reverse mortgage companies to ensure this loan is right for their financial needs and to understand exactly how payouts and repayment works. The best reverse mortgage lenders will be fully transparent on how reverse mortgages work and won’t pressure homeowners into a loan they don’t need. This is crucial to protect their financial assets and ensure their heirs aren’t left with a debt they are not expecting.
- BEST OVERALL: American Advisors Group
- RUNNER-UP: Longbridge Financial
- BEST CUSTOMER PROGRAMS: Reverse Mortgage Funding
- BEST ALTERNATIVE: Finance of America Reverse
- ALSO CONSIDER: Liberty Reverse Mortgage
Photo: depositphotos.com
What Is a Reverse Mortgage?
For homeowners age 62 and older, a reverse mortgage converts their home equity into a loan that pays them instead of them making monthly payments on a traditional mortgage. On the surface, it sounds like a win-win, but it’s important to fully understand how it works. A reverse mortgage is a loan that must be repaid when the homeowners are no longer living in the home. Oftentimes, the home is sold and the proceeds are used to pay off the loan. In another scenario, the reverse mortgage holder dies and their heirs are responsible for paying off the loan. Keep in mind the loan accrues interest over time so the amount to be repaid will be more than the original principal amount of the reverse mortgage.
In addition, the homeowner is required to stay current on property taxes, homeowners insurance, and homeowners association fees, as well as keeping the home in good repair. Failure to do so could prompt the mortgage lender to require immediate repayment of the reverse mortgage, and, if the homeowner is unable to do so, the lender may foreclose on the loan.
What to Consider When Choosing One of the Best Reverse Mortgage Companies
When shopping for the best reverse mortgage company, it’s important to find a mortgage lender that will fully explain the terms and requirements of each type of reverse mortgage as well as how much home equity is needed to qualify for a reverse mortgage. The best-rated reverse mortgage companies also won’t draw out the loan process; instead, they will have a streamlined process so homeowners won’t have to wait to get their loan proceeds.
Service Area
Not all reverse mortgage lenders serve all states. For instance, because single-purpose reverse mortgages are typically offered by non-profit organizations and state and local government agencies, they are not widely available to all homeowners. Therefore, it’s important to search for reverse mortgage companies that service the area where the homeowner lives before proceeding with a loan application.
To help homeowners find a reverse mortgage lender, the Federal Housing Administration provides a search tool for FHA-approved reverse mortgage lenders. These reverse mortgage lenders offer home equity conversion mortgages (HECMs), which are backed by the U.S. Department of Housing and Urban Development (HUD). They may not offer all types of reverse mortgages.
Types of Reverse Mortgages Offered
There are three types of reverse mortgages. The first is a single-purpose reverse mortgage wherein the lender dictates what the loan proceeds may be used for, such as home improvements or property taxes. The second is a proprietary reverse mortgage, also called a jumbo or private loan, which typically offers loan amounts up to $4 million. This could be a good choice for homeowners whose home value is more than the maximum FHA limits for HECMs.
The most common type of reverse mortgage is a home equity conversion mortgage, which is a federally insured loan whose proceeds can be used by the homeowner for any purpose. To qualify for most reverse mortgages, the homeowner must go through counseling, and for a HECM it must be with a HUD-approved counselor. There are other considerations as well, such as the appraised value of the home and the homeowner’s ability to pay the property taxes and homeowners insurance. Homeowners may also have the option of getting another type of HUD-guaranteed loan called a HECM for Purchase to help in buying a new home.
Equity Requirement
In general, the more home equity the homeowner has, the better qualified the homeowner is likely to be for a reverse mortgage. Also, more equity equals higher loan proceeds for the homeowner. Equity requirements vary by lender, but most reverse mortgage lenders look for homeowners with a minimum of 50 percent equity in their homes. Homeowners who don’t have 50 percent home equity may need to wait until they have enough home equity to qualify for a reverse mortgage.
If they need financial assistance now, homeowners whose equity does not qualify them for a reverse mortgage may consider other options, such as refinancing their mortgage, taking out a home equity loan or line of credit, or selling the home and moving into a more affordable one.
Quote Process
When shopping for the best reverse mortgage lenders, it’s important to get quotes on the fees and closing costs that accompany the loan for a fair comparison of the loan terms. This includes comparing interest rates. In many cases, the best reverse mortgage rates are offered on HECMs because they typically have fixed rates. The other types of reverse mortgages often come with variable interest rates, which could increase during the life of the loan, leading to a hefty loan balance at the time of payoff.
Getting a quote may take some legwork, as some reverse mortgage companies don’t provide online quotes at all or may ask for a lot of personal information before providing an online quote. It’s possible homeowners may need to speak with a lender by phone to get a quote. This can be time-consuming, but it’s important to have quotes beforehand in order to find the best reverse mortgage available.
Closing Time Frame
When applying for a reverse mortgage, most homeowners want to get through the process as quickly as possible. Based on our research, the industry average is approximately 45 days from the time of loan application to closing. The exact closing time frame varies by lender, so it’s important to ask how long the closing will take before choosing a reverse mortgage company. Companies that have long closing time frames may not be a good fit if the funds are needed right away. If a reverse mortgage company has a closing time frame of more than 60 days, this could be a red flag to move on in the search for the best reverse mortgage companies.
Our Top Picks
The best reverse mortgage companies provide educational information for homeowners as well as relatively short closing time frames and programs to help homeowners cover closing costs.
Photo: aag.com
Why It Made the Cut: A large and well-known name in the reverse mortgage industry, American Advisors Group offers a wide range of products as well as a good amount of information available for homeowner education.
American Advisors Group (AAG) is ranked as the number one HECM lender in the U.S. In January 2022, AAG closed almost 28 percent of the HECM loans taken out nationwide compared to less than 10 percent for the next-highest-volume lender. This knowledge can help customers feel more confident that their lender has their best interests in mind since so many others have trusted AAG with their reverse mortgage needs.
AAG provides HECM, HECM for Purchase, and jumbo loans to fit the needs of most homeowners. The company also offers mortgage refinancing for homeowners who may not yet be eligible to take out a reverse mortgage. To make sure homeowners have the information they need on reverse mortgages, AAG offers a free information kit as well as online educational resources. While information about closing time frame, equity requirements, fees, and discounts is not readily available online, homeowners can work with a specialist to get more specific information about their particular situation.
Committed to helping the community of older adults, AAG encourages employees to volunteer with organizations such as Meals on Wheels. AAG provides employees with paid volunteer time off so they can help give back to the communities they serve and help reduce hunger and isolation among older Americans.
Specs
- Service area: 50 states and Washington, D.C.
- Loan options: HECM, HECM for Purchase, jumbo
- Equity requirement: Not specified
- Closing time frame: Not specified
Pros
- Largest reverse mortgage lender in the U.S. by market share
- Free info kit and online educational resources
- Loan refinancing available for those ineligible for a reverse mortgage
- Commitment to give back to the community of older adults
Cons
- Information about cost or discounts not readily available online
- Information about average closing time not readily available
Photo: longbridge-financial.com
Why It Made the Cut: Longbridge Financial is committed to closing loans in 45 days or less. It offers valuable resources to homeowners researching reverse mortgages as well as free identity-theft protection for current loan customers.
Longbridge Financial does a great job of providing information on reverse mortgages so homeowners can learn all they need to know regarding this type of loan. Not only can homeowners find educational articles and videos on the company website, but they can also order a free information kit that will be mailed to them. The company provides easy-to-access customer service through its online chat feature and mobile app, though customers using chat may be encouraged to call the company to get specific questions answered.
During the application process, Longbridge commits to being in touch with customers at least once a week to keep them updated on their loan status. This helps ensure the customer feels comfortable with the process rather than feeling left in the dark. Also, Longbridge is committed to closing its loans within 45 days of receiving the application and counseling certificate, so customers won’t have to worry about the closing process dragging on too long.
Longbridge offers free identity-theft protection for customers. This is a unique feature in this space and is relevant for older adults, who are more likely to fall prey to this type of scam. The company also offers a $500 discount to U.S. military veterans and active-duty service members as a way to honor those who have served their country.
Specs
- Service area: 50 states and Washington, D.C.
- Loan options: HECM, HECM for Purchase, jumbo
- Equity requirement: 50 to 70 percent
- Closing time frame: 45 days or less
Pros
- Commitment to close loans within 45 days of receiving application
- Free info kit and online educational resources
- Free identity-theft protection
- Convenient access through mobile app
- User-friendly and convenient customer service online chat
- Discount for active-duty service members and military veterans
Cons
- Personal information required for an online quote
- Online chat function may push the customer to call to get answers to their questions
Photo: reversefunding.com
Why It Made the Cut: Reverse Mortgage Funding offers some unique guarantees and programs such as assisting homeowners with costs and meeting competitors’ pricing so homeowners can get the best loan terms.
Reverse Mortgage Funding (RMF) provides a lot of customer-first programs that are unique in the reverse mortgage industry. For instance, the company will send loan specialists to potential customers’ homes to educate them on the process and help them with their application, which can be helpful for homeowners without transportation to get to the lender’s office. In addition, the Customer for Life Commitment guarantees that RMF will service the reverse mortgage for the life of the loan. Often, lenders who originate mortgage loans sell them or transfer the servicing rights to another company, and the borrower’s consent is not needed to make the transfer. By committing to service the loan, RMF provides added peace of mind to older adults taking out a reverse mortgage on their property.
Through its Price Match Program, RMF will match competitors’ pricing so homeowners know they are receiving the best offer for their financial situation. If the company is unable to do so, it will give the customer a $1,000 gift card. Additionally, customers who opt for RMF’s jumbo loan will get the Equity Elite ZERO lender credit to help with closing costs and may be eligible for lower interest rates (though this type of loan is only available in 19 states and Washington, D.C.). RMF reports an average closing time frame of 30 to 45 days, which is on the low end of the industry average, and offers $450 toward appraisal costs for borrowers affiliated with the U.S. military through the Veteran Discount Program.
Specs
- Service area: 50 states and Washington, D.C.
- Loan options: HECM, HECM for Purchase, jumbo
- Equity requirement: 50 percent
- Closing time frame: 30 to 45 days
Pros
- Promise to meet or beat a competitor’s pricing
- Guarantee that RMF will service the loan for its entire life
- Convenient customer service with loan specialists able to travel to the potential client’s home
- Equity Elite ZERO lender credit helps cover closing costs $450 toward appraisal costs offered via the Veteran Discount Program
- Below-industry-average 30- to 45-day closing time frame
Cons
- Equity Elite jumbo loan only available in 19 states and Washington, D.C.
- Personal information required for an online quote
Photo: far.com
Why It Made the Cut: Finance of America Reverse offers a unique loan for older adults who may not have enough equity in their home yet to qualify for a reverse mortgage.
For homeowners who are interested in a reverse mortgage but don’t have enough home equity yet, Finance of America Reverse’s EquityAvail program lowers the homeowner’s mortgage payments for 10 years, providing them with more money in their pockets each month. At the end of that time frame, the loan becomes a traditional reverse mortgage, with no payments required from the homeowner and more money directly into their pockets. This loan is unique in this space and offers an alternative for older homeowners who need extra cash flow but cannot qualify for a reverse mortgage. However, this unique loan is currently only available in 10 states.
Finance of America (FOA) also offers a jumbo loan called HomeSafe that has options with no origination fees, which can save homeowners money at closing. While closing can take up to 60 days, which is on the higher end of the range, customers will be kept informed of the loan’s progress so they will know what to expect.
FOA offers a user-friendly online chat function to help homeowners find out more about their product offerings. The chat feature connects customers to a live representative who can answer specific questions and provide a tailored quote without the customer needing to talk to anyone else on the phone or in person.
Specs
- Service area: 50 states and Washington, D.C.
- Loan options: HECM, HECM for Purchase, jumbo, retirement mortgage
- Equity requirement: Varies
- Closing time frame: 60 days or less
Pros
- Retirement mortgage designed for homeowners with lower home equity
- Proprietary loan with options that have no origination fees
- User-friendly and convenient customer service online chat
Cons
- No instant online loan quote
- EquityAvail is only available in 10 states
- Relatively long average closing time frame of up to 60 days
Photo: libertyreversemortgage.com
Why It Made the Cut: Liberty Reverse Mortgage offers a meet-or-beat guarantee and a promise to close the loan within 60 days or it will issue a $500 credit.
Available in 46 states and Washington, D.C., Liberty Reverse Mortgage offers a good selection of reverse mortgage products, as well as mortgage refinancing services for customers who are ineligible for a reverse mortgage. Through its Liberty Iron Clad Guarantee, Liberty promises to meet or beat a competitor’s pricing, and it will issue the customer a $100 Visa gift card if it is not possible. This guarantee helps give the homeowner peace of mind knowing they have received the best loan terms available to them.
Liberty also offers a $500 credit toward closing costs if the closing process takes longer than 60 days. This helps the homeowner feel more confident their loan will close in a timely manner, and if it doesn’t, they will save money on their closing costs.
Specs
- Service area: 46 states and Washington, D.C.
- Loan options: HECM, HECM for Purchase, jumbo
- Equity requirement: 50 percent
- Closing time frame: 60 days or less
Pros
- Guarantee to meet or beat a competitor’s pricing
- Credit of $500 offered if loan is not closed within guaranteed time frame
- Loan refinancing available for those ineligible for a reverse mortgage
Cons
- Not available in Hawaii, New York, South Dakota, or Utah
- Relatively long average closing time frame of up to 60 days
Our Verdict
American Advisors Group is our Best Overall choice because the company offers reverse mortgage products nationwide, along with educational materials for homeowners new to this type of loan. Longbridge Financial is our Runner-Up because it offers free identity-theft protection for customers, which is a unique offering in this industry.
How We Chose the Best Reverse Mortgage Companies
To find the best reverse mortgage companies, we looked first to find companies that served as many homeowners as possible. Most of our choices service customers nationwide, although not all product offerings are available in all states. We also searched for companies that stood out among their competitors by offering unique programs or guarantees that put the customer first. Along those same lines, we looked for reverse mortgage companies that provided a good amount of educational information to homeowners new to this type of loan. We also considered reverse mortgage companies that offered unique loan types that would benefit homeowners.
Before You Choose One of the Best Reverse Mortgage Companies
With no monthly mortgage payments and the homeowner receiving payments from the lender, a reverse mortgage can sound like an ideal solution for easing financial burden and providing extra cash in retirement. But reverse mortgages are not always the right choice for every homeowner. It’s imperative for homeowners to learn every detail about these loans, the costs associated with them, and the requirements to keep them in good standing before moving ahead with a loan. It’s also important to remember the payoff amount will be more than the initial loan amount due to accrued interest over the life of the loan.
There may be better alternatives, such as refinancing, home equity loans or lines of credit, or selling and downsizing. Homeowners should evaluate all their options before obtaining a reverse mortgage.
Age and Equity Requirements
Traditional HECM reverse mortgages are designed only for homeowners who are age 62 and older, though the age requirement could be as low as 55 for some jumbo loans. While there is no set equity requirements, reverse mortgage lenders typically require homeowners to have a minimum of 50 percent home equity, but there are lenders who prefer higher amounts, up to 70 percent. Obviously, the more home equity a homeowner has, the better positioned they are to qualify for a reverse mortgage.
Homeowners who don’t have enough home equity may need to wait until they have sufficient equity to apply for a reverse mortgage. There may be reverse mortgage lenders who have programs to help homeowners until they have enough equity to qualify for a reverse mortgage.
Type of Property
Reverse mortgage lenders look at the type of property when considering a reverse mortgage loan application. Single-family homes are the most common types of property that qualify for a reverse mortgage. However, multifamily homes with up to four units may qualify provided the borrower occupies one of the units as a primary residence. Most condominiums also qualify for a reverse mortgage as do manufactured homes. Some farm homes also may qualify. One of the main requirements for any property is that it be the primary residence of the homeowner.
Second homes, homes in co-op properties, and multifamily homes with more than four units do not typically qualify for a reverse mortgage.
Mandatory Counseling
For all HECM loans and some proprietary loans, all borrowers are required to meet with a counselor before applying for a reverse mortgage. For HECM loans, the counselor must be HUD approved. These counselors will explain all the details of how a reverse mortgage works, the associated costs, and the financial implications a reverse mortgage could have on the borrower’s individual financial situation.
The counselor also must explain all alternatives to a reverse mortgage so borrowers understand what their options are before making a decision. Typically, there is a fee of approximately $125 for counseling, which can be rolled into the loan balance on the reverse mortgage. Borrowers who cannot afford the fee will not be turned away.
Up-Front Costs
As with a traditional mortgage, a reverse mortgage comes with costs and fees that must be considered when applying for this type of loan. While these fees vary by loan type, they typically include origination fees, servicing fees, mortgage insurance premiums, counseling fees, appraisal fees, title search fees, recording fees, and other closing costs.
Borrowers can pay these up-front costs in cash, or they can use funds from the loan proceeds to cover them. This could cut into the amount of money they are expecting to receive from the reverse mortgage, but it may provide the best option to make sure the costs are paid.
Homeowner Responsibilities
During the term of the reverse mortgage, homeowners are expected to meet three key requirements to keep their loan in good standing. The first is to pay all property taxes when they come due. The second is to keep homeowners insurance current on the property and pay any homeowners or condominium association fees when due. The third is to keep the home in good repair.
Failure to meet these three requirements could lead to the lender requiring the loan to be paid in full. If the borrower is unable to pay the loan, the lender could foreclose on the reverse mortgage and the borrower will lose their home.
Cost of Choosing One of the Best Reverse Mortgage Companies
The costs of a reverse mortgage are typically higher than those with a traditional mortgage, so it’s important to review all costs before choosing a reverse mortgage. Although we have chosen these five companies as the best reverse mortgage companies, they may not be the right choice for every homeowner. Therefore, it’s important to research every detail of a reverse mortgage as well as all available alternatives before making a decision. Talking with loved ones is important as is talking with a trusted financial advisor or estate-planning attorney. They can help examine all the financial implications of a reverse mortgage.
The Advantages of Choosing One of the Best Reverse Mortgage Companies
Choosing one of the best reverse mortgage companies could mean alleviating the burden of monthly mortgage payments while receiving funds to help with daily living expenses and unexpected costs. These companies may provide a reverse mortgage product with unique offerings such as price-match guarantees that could help ensure borrowers receive the best terms on their loan.
- These reverse mortgage companies provide educational resources to help homeowners learn all they need to know about reverse mortgages.
- These companies offer unique programs such as price-match guarantees or free identity-theft protection.
- These companies offer reverse mortgage products to homeowners in almost all states.
FAQs
Reverse mortgages work differently from many other home loans, so it’s crucial to understand exactly how they work, the costs involved, and the repayment terms. Here are the answers to some of the most frequently asked questions about reverse mortgages.
Q. What are the types of reverse mortgages?
The main types of reverse mortgages are single-purpose reverse mortgages, proprietary or jumbo loans, and home equity conversion mortgages (HECM).
Q. Do banks provide reverse mortgages?
Not all banks do, but there are banks that provide reverse mortgages as well as lenders that specialize in reverse mortgages. Shopping around can help homeowners find a bank or other lender with the best terms for their needs.
Q. How do I qualify for a reverse mortgage?
Qualification for a reverse mortgage depends on many factors, including the homeowner’s age, the appraised value of the home, and how much home equity the homeowner has.
Q. What are the downsides of a reverse mortgage?
The downsides of a reverse mortgage include high costs and a higher payoff amount than the original loan amount. Additionally, taking out a reverse mortgage on a home may decrease the inheritance for the homeowner’s heirs when the homeowner dies.
[ad_2]
Source link
