Reverse mortgages have previously been the topic of several Palm State Mortgage Company blogs. So let’s rewind and review this controversial financial term. Every spring, we must re-discover and re-examine reverse mortgages within the ever-changing mortgage and real estate market. It’s time to rewind, review and update some of the facts, the pros and the cons concerning this unique type of loan.
Magic or Mayhem: Reverse Mortgages
First of all, some people give this type of mortgage a bad reputation. However, one million senior homeowners have benefited from reverse mortgages. They have used this financial product to supplement their retirement incomes.
In case you didn’t know it, “Reverse mortgages offer numerous advantages to borrowers.” Just like many commercials say, reverse mortgages allow buyers to retain “ownership and live in their homes as long as they comply with loan terms.
Love at First Sight: Seniors and Reverse Mortgages
When you first learn about reverse mortgages, chances are you will find them attractive. Yes, many people are initially smitten with the idea. This happens simply because the Reverse Mortgage eliminates monthly mortgage payments. Then, on a second look, then they realize there are contingencies to this arrangement.
- You must maintain the home as your principal residence.
- You are still responsible for paying all property taxes.
- Likewise, the homeowner must keep homeowner’s insurance payments current.
- And you must keep your part of the bargain by complying with any other loan terms.
- Although helpful for some, the brash advertising and dazzling cash offers make some loan seekers wonder. Are reverse mortgages simply scams? Are they just “too good to be true?”
The Horror Stories: Reverse Mortgages
Some dishonest salespeople have given a bad name to reverse mortgages. Hence, we have all seen headline stories of scammers with financial products they might have named reverse mortgages. However, the U.S. Department of Housing and Urban Development (HUD) created the “federally-insured Home Equity Conversion Mortgage (HECM) reverse mortgage loan.”
We admit that, over the years, some reverse mortgage loans have solidly proven their value to senior homeowners…’
But here is the “hook:” Only trustworthy and reputable lenders process the real thing…
Dream Come True: Protection from Rip-offs in Reverse Mortgages
Know the lender’s reputation. This is one of the most important things homeowners can do to protect themselves against rip-off reverse mortgages scams. Many senior citizens ask, “how can you verify that a reverse mortgage lender is in good standing, trustworthy and safe?” HECM
Know Who You’re Dealing With:
When seeking a safe lender, look for some special identifying characteristics:
- Is your HECM Offer from a Government-Approved Lender?
Thus, “the first place you should check regarding a lender’s credentials is on the HUD website. Federal Housing Administration (FHA) approved lenders issue loans that are backed by the government, which means that they must apply and conform to federal standards.”
- You can check on NRMLA Members.
Typically, a trustworthy lender will have active membership in the National Reverse Mortgage Lenders Association (NRMLA).
By the way, NRMLA has created a strict code of ethics for the reverse mortgage industry.
- All lenders who are members of this association vow to present America’s senior population with the best possible financial product.
- NRMLA membership means that the lender has committed to the highest of ethical standards. Find lenders who are members of NRMLA
Another Check on a Reverse Mortgage Lender: Is the Lender Accredited by the Better Business Bureau?
You can find this out at a great online resource. fully accredited by the Better Business Bureau.
The BBB is a “nonprofit organization that encourages positive relationships between customers and businesses.” Verify a lender on the BBB website.
Is the Reverse Mortgage Lender Licensed?
Double-check that a lender holds appropriate state and federal licenses.
- According to the experts, a well-qualified professional lender will be properly licensed to originate reverse mortgages.
- They typically post their licensing information on their website and in their office.
- Likewise, “each mortgage professional within the organization should be licensed to originate loans in your state as well, so be sure to ask for their Nationwide Multistate Licensing System, or NMLS, number.”
Review and Rewind: Reverse Home Mortgage, 2019
Before you make as Reverse Mortgage commitment. Let’s briefly review the identifiable traits of this type of mortgage:
- You qualify for a Reverse Mortgage if you are 62 and over.
- This type of loan is FHA insured. However, it differs from all other mortgages. This loan comes due when you are, to put it subtly, no longer alive.
- And, you must provide the home with proper care and maintenance.
- Reverse mortgages are not free of some types of payments: You must pay and property insurance and taxes.
- It’s true that this type of mortgage is useful for paying off an existing forward mortgage. Thus, you no longer pay the mortgages once a month.
- This financial tool works best in cases of homeowners with 50% or more equity invested in their home.
Reverse Mortgages: Not Luxury Vacation Tickets
Many companies market Reverse Mortgages with commercials which show seniors buying exotic ocean liner trips and swimming pools. However, these financial tools are more often used for much more practical purposes like medical and daily living expenses. Remember, people are living longer than they planned.
In 2015, Palm State Mortgage predicted the overselling of Reverse Mortgages. “We still think it’s a sad thing that some loan officials zealously over-sell reverse mortgages as all-cash withdrawals.
- We want you to understand that such lenders base profit by the amount of the initial loan.
- This is one of the reasons that reverse mortgages gained such a bad reputation.
We wanted you to have the above information concerning the validation of your lender. However, Palm State Mortgage Company will only submit offers to you from reputable mortgage lenders. Likewise, we are aware reverse mortgages are a very expensive type of loan. Often we can find alternatives to it. Thank you for reading our blog this week and we invite you to check out our previous article on this topic.