If you’re thinking of taking out a reverse mortgage, you need to educate yourself before you even begin shopping for a lender. Taking out a reverse mortgage could be quite confusing, and while it could provide you with the necessary funds you could use for whatever purpose you want. It could also cost you more than you’re willing to give up.
That said, taking the time to learn about reverse mortgage programs would help secure the possible deal for you. Primary Residential Mortgage, Inc. and other experts list some details you can find useful:
The amount of money you could borrow would depend on your home’s value, your age, future and present interest rates, lender or federal limits, as well as lender fees. When you take out a reverse mortgage, you’re essentially taking out a loan against your home in exchange for your lender who’s giving you the money. The funds might come in monthly payments or lump sum provided that you continue living in your home, in bigger monthly payments for a predetermined amount of time, some sort of loan commitment you could use in the future, or a combination of these payment schemes.
If you’re looking at the home equity conversion mortgage (HECM), take note that approved lenders should observe HUD guidelines and that most of the loan costs would be in the same ballpark regardless of the lender. Still, specific costs such as servicing fees, closing costs, and originations fees vary widely among approved lenders.
Consider other mortgage options. If you need to make improvements or repairs to your home, you might consider other single-purpose, low-cost loans for home improvements such as the FHA 203(k) loan.
If your home’s value is on the higher end, a proprietary reverse mortgage might be more ideal for you. But first, make sure to compare the differences between a property reverse mortgage and a HECM reverse mortgage.
Regardless of your choice, make sure you fully understand the terms and conditions that could make your mortgage payable and due. Ask your lender for the Total Annual Loan Cost (TALC) to see a reverse mortgage’s projected annual average cost.
Being sufficiently informed would put you in a much better position to select the most suitable reverse mortgage program that’s perfect for you. Taking into account what you intend to do with the funds you’ll get, as well as the fees, terms, and options from different lenders.