MAKE MONEY ONLINE POSTS: Best Reverse Mortgage Loans

الاثنين، 7 أكتوبر 2019

Best Reverse Mortgage Loans

A reverse mortgage should not be your first choice for money during retirement. Yes, these loans can liquidate your home’s equity in helpful ways. Sadly, they can also zap the value in your home, replacing it with debt.

If you need a reverse mortgage, be sure to compare several different programs. Look for the loan that helps the most while minimizing the risk to your heirs.

Best Options for a Reverse Mortgage

Maximizing the reward while minimizing the risk — that’s the magic formula for any financial product. There’s no secret map to reach this sweet spot with your reverse mortgage. If there were, I’d share it!

Instead, finding the best reverse mortgage loan requires knowing your specific needs and identifying the lender that lines up best with your needs.

I will always lean toward lower fees and lower rates. That goes without saying. So let’s dig a little deeper to find the best use for these loans:

Best Overall for Reverse Mortgage: AAG

American Advisors Group (AAG) has emerged as the leader among reverse mortgage providers, both in quantity and quality.

AAG provides all the programs most borrowers need:

Loan Types: Whether you need a traditional reverse mortgage, which trades equity for cash, or a loan to refinance your home or to purchase another property, AAG can help. AAG also has proprietary reverse mortgages. Since they do not follow federal guidelines, proprietary reverse mortgages can offer bigger loans.
Disbursements: AAG also covers the spectrum for disbursement options: lump sums, term (monthly) disbursements, or lines of credit — or innovative ways to combine these options.

AAG has solid ratings on Better Business Bureau and helpful and accessible customer service agents.

If you’re not sure how reverse mortgages work, AAG’s education programs are top-notch. (We’ll get into some of these details below, too.)

AAG Pros:

Competitive rates
Good online tools
Variety of options

AAG Cons:

Sales tactics can be pushy

Best for Proprietary Reverse Mortgage: Finance of America

A lot of lenders now offer proprietary reverse mortgages, including AAG as I mentioned above.

But if you’re shopping specifically for a proprietary loan, give Finance of America a close look. This lender specializes in proprietary loans which means you’ll have a wider selection of choices for loans on higher-value homes of $600,000 or more.

The difference between Finance of America’s five proprietary loans lies partly in how your loan funds would be disbursed:

HomeSafe Standard: Lump-sum payment.
HomeSafe Flex: 60 percent lump sum; 40 percent paid out over five years.
HomeSafe for Purchase: Lump-sum paid toward another property.
HomeSafe Second: Lump-sum payment to use as a second mortgage.
HomeSafe Select: An adjustable-rate line of credit backed by your equity.

Finance of America also has an easy-to-use web site designed especially for older shoppers. And, it’s not all about proprietary loans for Finance of America, which is often abbreviated FAR. The lender has a standard variety of federally subsidized (HECM) options.

As a bonus, borrowers who have an extra room or two in their home can use the Silvernest platform to get matched with a rent-paying housemate for free, generating even more income.

FAR Pros:

Five choices for proprietary reverse mortgages
Quality customer service
Silvernest service built-in for borrowers

FAR Cons:

Online tools are basic

Best Reverse Mortgage for Online Shoppers: Longbridge

Just about any lender can use its web site to connect you with customer service agents and show you its variety of products.

Longbridge Financial takes online reverse mortgage shopping to a new level. The site displays clear and easy-to-access details about Longbridge’s lending products. And, once you have a loan, the site makes managing your account seamless.

While Longbridge doesn’t have as many options as some other lenders, its loans have the versatility to give customers flexible options.

For example, you can choose an adjustable or fixed rate subsidized (HECM) reverse mortgage. You can also choose to access your funds as a line of credit, as an upfront lump sum, or as a series of monthly installments.

As with AAG, you can also combine these strategies: Take a partial lump sum and fund a line of credit with the remaining balance, for example.

Longbridge also has a proprietary loan — which it calls its Platinum reverse mortgage — for higher-value homeowners.

Longbridge Pros:

Online tools for shoppers & borrowers
Flexible loans

Longbridge Cons:

Fewer options than competitors

Best Lender for Education: All Reverse Mortgage

Naturally, you should do your own research before applying for a reverse mortgage. Before you sign any documents, find out how the loan affects your property after your funds are disbursed.

All Reverse Mortgage — a California-based lender serving states in the Southeast, Southwest, West, and Illinois — makes educating yourself easier.

The lender’s simple site goes beyond sales aids to show you the pros and cons of the loan you’re considering. Sure, you should always seek out independent information, but borrowers who aren’t sure how their loan would perform can still benefit from this lender-provided information. The site’s “Ask Arlo” FAQ feature has accumulated a lot of useful information, too.

Despite these resources, you won’t find a ton of details about All Reverse’s loans online. Instead, you’d need to call or connect with a counselor online. Once you do make contact, you’ll be in good hands. All Reverse takes a one-on-one approach when it issues a loan. Most customers like this personal touch.

All Reverse Mortgage Pros:

Top-notch education tools online
Solid array of reverse mortgage products
Personal approach

All Reverse Mortgage Cons:

Online shopping tools limited
Licensed in only 17 states

Best for Comparing Rates: Lendingtree

Lendingtree isn’t actually a lender. It’s an aggregator that allows shoppers to get quotes from a variety of lenders and compare rates.

Lendingtree has added reverse mortgages to its stable of products you can compare, and the service can be really helpful, assuming you don’t mind entering some private data such as your Social Security number and potentially getting your credit pulled.

If you use this tool, keep this in mind: Getting quotes does not obligate you to follow through on any of the quotes you see. The best quote you see on Lendingtree isn’t necessarily the best quote in the market.

The service recommends high-quality loans, though, including products from lenders on this list, making your shopping process more efficient.

Lendingtree Pros:

No user fees (the actual lender will assess loan fees)
A good tool for comparing quotes
Service connects with quality lenders

Lendingtree Cons:

Service can give a false sense it encompasses the entire market
Some users report getting a “soft credit pull” which can affect future credit scores

Most Accessible Reverse Mortgage: One Reverse

One Reverse is now part of Quicken Loans, one of the highest-volume mortgage lenders in the country. Huge lenders have their benefits, such as almost nation-wide licensure (One Reverse products aren’t available in West Virginia, Vermont, and Rhode Island) and always up-to-date online tools.

One Reverse lives up to this promise in a lot of ways. The company offers flexible loan options and competitive rates. But if you’re accustomed to Quicken Loans and its subsidiary Rocket Mortgage, you may be disappointed with One Reverse’s online tools.

Rather than setting site visitors on a seamless course toward loan options, One Reverse directs traffic to a telephone number or a simple online questionnaire designed to connect you with a specific loan. Many customers may appreciate having a conversation or a streamlined loan selection tool. Others, though, may prefer a more robust online experience and a way to compare products.

One Reverse also does not offer a proprietary, or jumbo, reverse mortgage loan. It does, however, give customers several options for federally subsidized HECM products, including a fixed and adjustable-rate option.

One Reverse Pros:

Wide availability (47 states)
Competitive rates

One Reverse Cons:

No proprietary reverse mortgage option
Limited web site

How Reverse Mortgages Work

If you’ve compared quotes and explored lending options, you already know the basics of reverse mortgages. The testimonials you’ll hear in marketing campaigns also tell a version of the story: A reverse mortgage pays you money each month rather than the other way around.

Is this true, and how is this possible? These two questions tend to arise when people first start learning about reverse mortgages.

Ultimately, a reverse mortgage behaves a lot like a second mortgage: You’re borrowing against the equity in your home. So the bank isn’t actually paying you money. It’s helping you access your money: money you’ve already saved and built up as equity in your home.

At some point you — or your heirs — will have to pay back the loan, most likely when you sell the home.

Reverse Mortgages vs. Second Mortgages

A reverse mortgage has some key differences compared to a second mortgage:

Loan Disbursement: A reverse mortgage can pay out your borrowed funds gradually over time — hence the idea of the loan “making payments” to you. Borrowers can also opt for a lump-sum payment or a line of credit to be used as needed.
Loan Payback Terms: As you know, a second mortgage must be repaid gradually over time. A reverse mortgage won’t be repaid until you sell the house or stop using the house as your primary residence (for 12 months or more).

More Reverse Mortgage FAQs

Still not sure about getting a reverse mortgage? A lot of potential shoppers have questions like these:

What About Interest?

This is a good question. Since you’re not making payments to repay your borrowed funds, what happens to the interest?

Short answer: It builds. Because of this accumulation, the amount you owe on your reverse mortgage will typically grow larger as time passes, unlike a traditional mortgage whose balance goes down each month. Hopefully, the equity in your home will continue to appreciate, balancing out this growing loan balance.

What About Closing Costs?

A reverse mortgage’s upfront fees will grab your attention. Loan origination fees typically range from $2,000 to $6,000 depending on the size of your loan. (The Federal Housing Administration caps fees at $6,000 for subsidized loans.)

You’ll also be paying for appraisals, credit reports, title insurance, title searches, inspections — all the usual stuff you’d expect in a real estate closing. Many borrowers pay these fees with funds from the loan itself. It’s kind of like financing your closing costs when you buy a house: not a great idea, but OK if it’s your only choice.

If you’re using a reverse mortgage to buy another property, you’ll most likely face closing costs associated with the new property, too.

What About Ongoing Costs?

The interest on your loan could be considered an ongoing cost, but it’s not something you’d need to pay until you or your heirs pay off the loan. You should, however, expect to pay mortgage insurance premiums which average 0.5 percent of your loan’s balance each year. A $200,000 loan would require about $1,000 a year in premiums.

Be sure to find out about monthly service fees, too. Many banks add a small amount — $25 or $40 for example — to your balance as a service fee each month.

Who’s Eligible?

Because the federal government is deeply involved in regulating reverse mortgages (except proprietary loans), these eligibility guidelines can change from year to year.

To get a reverse mortgage, an applicant must:

Be 62 or Older: Applicants younger than 62 won’t qualify. For a joint application, both applicants must be at least 62.
Live in the Home: The home must serve as your primary residence. If you sell the home or move — even into assisted living — for 12 consecutive months, your loan can come due in full.
Maintain the Home: Even with a reverse mortgage in place, you’re still the owner of the home and have the responsibility to maintain the home. More and more lenders are requiring proof of proper maintenance. After all, your reverse mortgage lender is technically a large investor in your home.
Pay Off Other Liens: In most cases, you’ll need to pay off existing mortgages before getting a reverse mortgage. If you have a small remaining balance on a mortgage, you could use funds from the reverse mortgage to pay it off.

Bottom Line: Avoiding and Understanding Reverse Mortgages

As you can see, a reverse mortgage costs a lot — hefty fees, accumulating interest, loss of equity. As the borrower, you can avoid feeling the effects of these costs by folding them into your loan.

But your home still absorbs these expenses, and sooner or later, they’ll take their toll. When you sell the home — or when your heirs sell it — the true weight of these expenses will be felt.

So here’s the deal: If you’ve still got some time before retirement, make sure you’re working with a retirement planner. He or she can help you position yourself to avoid expensive products like reverse mortgages when you’re older and no longer earning an income.

But if you’re already 62 or older and you need the cash a reverse mortgage can provide, that’s OK. Be sure you’re working with a good lender like the ones on my list above, and be sure you understand the true costs of your reverse mortgage — the costs now and in the future.

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