Reverse mortgages, available to homeowners age 62 and above, have sometimes been criticized for carrying higher upfront fees than traditional mortgages. Now that many lenders are opting to pay those fees, find out how to compare other features in reverse mortgage offers.
Reduction in fees makes reverse mortgages more appealing
Reverse mortgage guidelines have not changed in recent months, but reverse mortgage applicants are seeing some new features that may make these loans even more appealing: lower fees.
Most reverse mortgages are insured by the Federal Housing Administration (FHA) through the Home Equity Conversion Mortgage (HECM) program. Reverse mortgages are available to homeowners age 62 and older. The amount that can be borrowed is based on a sliding scale according to the equity in the home and the age of the homeowners, rather than a credit score or a debt-to-income ratio. This is because the loan is repaid when the home is sold or the owners pass away.
Typically, origination fees on reverse mortgage loans are a few thousand dollars, and are capped at a maximum of $6,000. The upfront mortgage insurance premium is 2% of either your home value or the FHA mortgage loan limit for your area.
In a recent MarketWatch article, Barbara Stucki, vice president of home-equity initiatives for the National Council on Aging, said, "Quite a few of the lenders now have reduced the origination fees. Some of them are getting rid of the origination fees. Some are willing to pay some of the mortgage insurance premiums upfront."
Reverse mortgage proceeds can be received as a line of credit, a lump sum, monthly payments or a combination of these methods.
Comparing reverse mortgage offers
Homeowners considering a reverse mortgage must receive counseling from a HUD-approved lender. In addition, borrowers should carefully compare lender terms to see which one meets their needs. Some lenders may reduce or eliminate the origination fee, but then change the servicing fee or increase the interest rate.
Reasons to consider a reverse mortgage
Some senior homeowners use a reverse mortgage to ease strains on their monthly budget. Others opt to use a reverse mortgage to pay off other debt or make home repairs. Gathering reverse mortgage information can help you decide if this product meets your financial needs.
Michele Lerner
Michele Lerner is a freelance writer with twenty years of experience writing articles and web content for newspapers and magazines on topics related to real estate, personal finance and business. Her clients include The Washington Times, Urban Land Magazine, NAREIT's Real Estate Portfolio, and numerous Realtor association publications. Michele's first book,
RSS Feed
