Many people and professionals are under the impression that the costs and fees associated with a reverse loan are very expensive and there is some truth to that belief and because of that belief, will not consider meeting with a qualified loan consultant to get the details.
Because there is more to consider and although initially, the loan is more expensive, over the years it becomes more affordable and could be the ideal solution for a senior who wishes to remain in their home and have some financial stability.
Whether or not the mortgage is a traditional loan or a reverse mortgage, they have similar fees with the exception of the IMIP fee that is charged on all FHA loans, including those where payments are made by the borrowers.
All mortgages have fees such as the following:
- Title Insurance
- Loan Processing
- Credit Report
- Points/Origination Fee
- Recording Fees
- Notary Fee
- Lender “Junk” fees
Reverse loans have some of the same fees with the exception of the following:
- No Processing Fee
- No Lender “Junk fee”
- Attorney review of Living Trust fee for the borrower
- Initial Mortgage Insurance Premium.
All fees on a reverse loan are well regulated by the federal government and that applies to traditional mortgages as well and cannot be changed after the initial disclosure to the loan client unless there has been a “change in circumstances” in reference to the appraisal of the property or the payoff information for an existing mortgage on the subject property.
I will go into this in more detail in my next post and will explain why reverse loans are more expensive in their Closing Costs.
This is due to the initial Mortgage insurance Premium charged by FHA on each loan.
Depending on whom you may talk to about about reverse loans, you will get many different opinions as to whether or not they are awful, wonderful or somewhere in between these two poles of opinions.
There is a number of inquires that come up on the Internet from people who are searching for information about these unique loans. And some of them are as follows:
- reverse mortgage cons
- simi valley reverse mortgage
- reverse mortgage disadvantages
- reverse mortgage companies
These are just a few of the searches that come up and of course there is more of them than I can list here.
The one that I didn’t see is “the loan of last resort”. At one time, the typical borrower was a senior who was running out of money to live each month and had no other resources for funds. And originally these types of borrowers were quite common.
And thus the term “the loan of last resort” was coined. But it’s incorrect these days because they are now being used to protect ones’ retirement savings from being rapidly drawn down, paying off an existing mortgage or buying a new home.
Reverse mortgages are the same as a traditional home mortgage, with the exception that the borrower is not obligated to make mortgage payments each month. Keep the home insured pay the property taxes and keep the home in good repair.
What are the typical objections to reverse loans? The equity is being drawn done ( but not necessarily) and their closings costs and fees are expensive.
I will go over these two concerns in my next post and the negative image this mortgage has with professionals and others.
Okay, what does “HECM” 4 Purchase mean? Is is some sort of mysterious formula for investing or making money? The general public is unfamiliar with this term as are most Realtors.
So what does it mean and why is it something that could be very useful and advantageous for a senior to know about? Its a type of mortgage that they can use to purchase a home or even a second home such as a vacation property.
And how would they do this?
Buy using funds from a reverse loan. As long as the borrowers are aged 62 or older and they have funds that could be used for a down payment on an a new property, they could possibly relocate to an area they have always wanted to live in or buy their dream home.
If you want to know more about this special loan program, please contact me for details and or I can provide you with information that is designed especially for you and your dream.
Within the last year newer and more affordable reverse loans have been created that allow the borrower more access to the equity in their home if it’s value exceeds 1MM. And these loans are without origination fees or the FHA MIP insurance, plus the homeowner can borrow up to 4 MM.