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Reverse mortgage has proved to be a booming business as more and more senior citizens are going for reverse mortgage loans against their property. Reverse mortgage leads means information about potential customers which is provided to the reverse mortgage agencies and companies. The agencies work very hard to collect information about these customers who might be going for reverse mortgage. These leads are very important as they enable the company to pursue the potential customer and explore the possibility of a loan. The right leads thus can bring big business for the reverse mortgage agencies.
One can buy reverse mortgage leads from various places. The most prominent ones are the lead generation agencies whose job it is to gain information about potential customers and provide them to the companies. These services are available at a certain price. Other places to get leads would be the internet and other service providers like the call centres and the telemarketers. You can find about many such agencies on the internet. NR leads (www.nrleads.com) is one such company, other ones being Caldwell and RM leads. Some of these service providers can provide phone numbers of the prospective clients as well.
But why buy reverse mortgage leads from another agency? There may be many reasons for it. For one, if you don’t buy these leads, then you have to maintain dedicated staff who would generate these leads for you. Maintaining these staff members would cost money, and as it turns out in most cases, this option is more expensive than buying leads from an independent agency. Secondly, since these agencies are dedicatedly doing this job, the quality of leads would be better in general as this is their business and they know it best. Thus, one can expect better leads, hence better worth of their money. Thirdly, this enables the reverse mortgage companies to devote their attention to actual deal making rather than trying to identify prospective customers.
Apart from these agencies, there are many individuals who generate leads as freelancers. These freelancers then sell these leads to companies at competitive prices. Thus, freelancers are also a great way to buy reverse mortgage leads at prices lower than established agencies would charge.
Also, the charges for leads vary from one lead generation company to another. The quality of lead will also vary. Hence, it is important that you explore two or three agencies before deciding to buy a lead. Once you have gained good amount of experience with any one agency, then you can decide to stick on with that agency.
Reverse mortgage origination fees are the fees which are charged by the lenders to give loan to borrowers. This is charged upfront but the payment does not need to be made, instead it is capitalized into the loan.
Reverse mortgage origination fees can be quite huge. The FHA approved reverse mortgage origination fee is up to a maximum of 2% of the asset appraised value or 2% of the FHA approved loan limit in that locality, which ever comes less. Thus we can see that the origination fee is based on the loan size, the higher the loan amount, the higher will be the origination fees. For normal mortgages, these rates are usually 1% of the loan amount. Thus we can see that the reverse mortgage origination fees are very steep compared to normal mortgage origination costs. Thus, you should have the lenders put down the costs in writing upfront well before you accept the reverse mortgage as it might turn out to be much higher than you expected.
A bad thing about reverse mortgage origination fees is the fact that it is capitalized as part of the loan. That means that not only do you pay the fee costs, an interest also gets accrued for this cost and this has a compounded effect which hugely increases the burden for the borrower.
The worst part is that reverse mortgage origination costs are not the only costs that are incurred. There are the government mortgage insurance costs, which is usually 2% of the loan amount, costs due to employing third party vendors to do property appraisals, closing fees and other service fees as may be charged by the lenders. In all, it is a very expensive proposition as the fees itself can come to tens of thousands of dollars. Add to this the compounding effect of this amount which is made part of the loan and you end up paying a booty for these costs. No wonder that these extremely high costs deter a lot of senior citizens from opting for reverse mortgages.
However there are certain lenders who have come up with schemes where there are zero reverse mortgage origination costs. These schemes are usually for loans of large amount, exceeding $200,000. For even higher amounts, the third party fees are also waived off. How this is made possible? Well, they property to loan value ratio is lower in these cases, thus you are getting a loan amount which is lesser than you would otherwise have got.
So if high reverse mortgage origination and other fees were deterring you from taking a reverse mortgage, now you have an option where you can choose to eliminate the costs if you are taking loans exceeding $200,000.
From its inception, reverse mortgages only had adjustable rates. However, because of the fluctuation in interest rates, senior citizens have become very skeptical about the taking up adjustable rate plans. This changing preference of the borrowers has made the lending agencies to come up with fixed rate schemes.
One of the major advantages of fixed rate reverse mortgage is the fact that the borrower is assured of a fixed and predictable quantity of fund. Thus, it is easier for the borrower to do his/ her financial planning and plan for expenditures accordingly. This gives a lot of stability too which is preferred by many a senior citizen.
Another advantage of fixed rate scheme is seen when the interest rates rise. Since the rate is fixed, you will be paying lesser interest that is existing in the market.
A fixed rate reverse mortgage is considered a safer option as you are not exposed to the vagaries of the interest rate which can change significantly due to economic conditions prevailing in the country. For an adjustable rate, the monthly statements can get seriously impacted by interest rate rise. They will keep getting the same amount; however the interest accrued will increase significantly.
However, fixed rate programs are not devoid of a few pitfalls. Fixed rate option is only applicable for lump sum payment and you cannot avail of a monthly payment scheme or an extension of line of credit with fixed rate reverse mortgages. For senior citizens who have an existing mortgage to pay off, this option can sound good as you can use this lump sum amount to offset the outstanding lien in one go. However for those citizens who have hardly and need for lump sum money and would rather prefer a monthly installment, it is not such a good option. In this case, they will have to look for ways to park this lump sum amount into some investment opportunity to see that they get some monthly payments out of it.
Also, the interest for the entire lump sum amount starts accruing as soon as the payment is made. In the case of monthly payment schemes, interest is accrued as and when part payments are made. Thus with monthly payments, the loan outstanding is less compared to lump sum payments and thus interest paid is also lower in the long run. Thus, monthly loan advances deplete the home equity of seniors at a slower rate than fixed rate plans.
It has been seen that adjustable rate schemes are eligible for higher loan amounts than fixed rate schemes for the same value of property. Thus, fixed rate scheme has its own pros and cons. It is up to the individual to opt for it if it suits him better.
Reverse mortgage can be quite a complicated process. It is not a simple financial instrument and there are a lot of costs, rates, fees and other things to look out for. A slight mistake and you could end up paying thousands of dollars extra and you will suffer your entire lifetime. So it is definitely not something to be done in a hurry. It is always advisable that you approach a reverse mortgage advisors who are experts in this industry and can guide you and assist you.
Reverse mortgage advisors are in the business of providing expert guidance to their clients. They are legal experts who have been in the industry for many years and handled hundreds of similar cases. Thus, they know all the possible pitfalls and all the places where the senior citizens can be duped by the lenders or give them a raw bargain. Also, they have excellent contacts of lenders and thus they will be able to assist you with finding lenders who have programs to meet your needs. As we know, the needs and expectations of each individual from reverse mortgage loan will be different. Someone might need a lump sum amount so as to repay some existing mortgage or meet other expenses while others would like to have an additional monthly installment to be able to lead a better lifestyle. The reverse mortgage advisors understand the needs of their clients and then provide customized advice and suggestions to meet their financial aspirations.
When you are approached by a salesperson, it is easy to get swayed by the apparent facts which are stated about reverse mortgage and it may sound very good. But it is best not to immediately accept the deal and sign the paperwork. It is always better to wait and consult reverse mortgage advisors.
One might argue that reverse mortgage advisors would cost money. Yes, they would. But otherwise, the chances of making a mistake and being on the receiving end of a bargain is also high. So, it is better to spend some money and seek counsel from experts. In case you would not like to spend so much money, you can seek the help from the legal counsel in your community where you live. Legal clinics are also available to provide help. There are other organizations which work with senior citizens and help them with legal advice.
Federal Housing Administration insured reverse mortgage programs are better as the federal government takes the responsibility of ensuring that the lender pays up the money in time. Also, paperwork is of utmost importance and make sure that all paper work is proper. It might be a good idea to collect all the documents, amortization statements, annual loan cost rate etc. and show them to the reverse mortgage advisors before signing on them.
Like any other form of traditional loan, one should also look out for the best rates when you are applying for a reverse mortgage loan. It might be a time consuming process to compare the reverse mortgage rates from various agencies, one can use the many reverse mortgage calculators available on the internet for a rough estimate of the rates. You can also speak to your acquaintances or check out the rates mentioned on many prominent websites.
Once you avail a reverse mortgage rate, you have to pay interest against it. The interest payment has to be paid irrespective of the type of reverse mortgage you choose - lump sum payment, monthly payments or advances to credit line. The reverse mortgage rates are also dependent on fed interest rates and thus fluctuate with time. Since these rates are not fixed, the competition between lenders can make them give the reverse mortgage at lower rates than others thus keeping a lower margin than others. Thus, it is a good idea to negotiate on the reverse mortgage rates well before accepting an offer. The rates can also be changed from time to time based on the overall interest rate scenario in the market.
The interest rate will also depend on the type of payment option you choose. The rates levied may vary between lump sum payment scheme and monthly payment scheme. Also, even if the rates are same, the amount of interest paid will differ. So it is must that you think hard and choose the right payment option to optimize the reverse mortgage rates available to you.
While calculators can give you a fair idea, the best way to get the exact details about reverse mortgage rates would be to talk to a lender directly.
There are two types of reverse mortgage rates available in the market - fixed rate and adjustable rate. In fixed reverse mortgage rates, the rate does not change for the entire tenure of the loan. The main advantage is that since the rate does not change, the borrowers know their exact cash flow and thus can manage their finances accordingly. However, on the flip side, if the mortgage interest rate shows a decreasing trend, then you will be a looser as you will end up paying a lot more interest than otherwise.
Adjustable reverse mortgage rates are those where the rates are adjusted from time to time. It is not advisable to go for adjustable rates if the interest rates are showing an increasing trend. Also, adjustable reverse mortgage rate plans have the option for monthly payments which is missing for fixed rate reverse mortgage plans.
Reverse mortgage program can be launched by various types of lenders. The program features will vary depending on the requirements of the borrowers and the type of lender who is extending the reverse mortgage loan. For example, single purpose mortgages are mostly issued by state government organizations to meet specific financial needs and thus have restrictions on how the loan proceeds can be spent. The program features of those schemes launched by the department of Housing and Urban Development are not that restrictive, however the interest rates charged are higher. Private organizations also have reverse mortgage programs, which do not have any sort of restrictions on how the money can be spend, but their interest rates are higher than the other programs. So you have to choose a reverse mortgage program based on which suits you best.
For example, in single purpose mortgage, the lenders will primarily be non profit or state or local government organizations. For federally insured mortgage, the lender would be the department of Housing and Urban Development. In the third case of proprietary reverse mortgages, the lenders are mostly private companies.
The reserve mortgage program which is chosen by the borrower will determine the cost which is incurred. Usually, there is a 2% origination cost and 2% mortgage insurance premium that are added to the loan amount. Add to this additional service charges like appraisal fees etc which keep adding the cost burden. But the cost structure varies from one reverse mortgage program to another. For some programs, the insurance premium is waived off while other costs are charged. For still other programs, the originating cost is also waived off if you take a substantial amount of loan above $ 220,000 or equal to the maximum amount of loan the borrower is eligible for. This criteria keeps differing from one reverse mortgage program to another.
The interest rates also vary from one reverse mortgage program to another. Most of the programs have an adjustable interest rate which means the rates are adjusted periodically, can be monthly or yearly, as per the federal interest rates prevailing at that point of
time. However recently, many programs are offering fixed rate mortgage plans where in the interest rate will remain fixed for the entire tenure of the loan. However, payment options are limited in such programs and only one time lump sum payment is allowed.
The state and the local governments also run some reverse mortgage program which is meant for seniors to meet certain specific needs, like payment of property taxes against their property or repairs and maintenance work on their property. Such programs are usually low cost, many a times they do not have any additional costs. The interest rates are better than other agencies. The only problem with this reverse mortgage program is that their qualifying criterias for the loan are lot more stringent and not every property qualifies for it.
Reverse mortgage can be simply defined as a loan which is extended to senior members of the society against their property holdings. Following are some reverse mortgage info that one should know.
First bit of reverse mortgage info is the eligibility criteria. To qualify for reverse mortgage, you need to be above 62 years of age in the United States.
However, there are no minimum income criteria, nor are there any credit standing requirements. However, in case of a bankruptcy case impending against the applicant, it may slow down the process of sanctioning of the reverse mortgage.
There is one condition that needs to be taken care of. It is that any outstanding mortgage for the applicant has to be paid out of the loan amount being given from reverse mortgage.
Another bit of reverse mortgage info is that there are certain restrictions for certain type of dwellings. Some type of dwellings do not qualify for reverse mortgage, while dwellings like mobile homes come with special requirements like permanent tie down before they are sanctioned for reverse mortgage.
Now the most important bit of reverse mortgage info. What determines the amount that will be made available to the applicant? It depends on a number of factors. For one, it depends on the value of the property as appraised by an independent appraiser and whether there are any existing claims against the property. Second would be the interest rates which are existing at that point of time when the reverse mortgage is being sanctioned.
Another bit of info is that the older the applicant is, the more an amount he/she is liable to get. The mode of payment of money whether its lump sum or monthly installment also determines how much money will get sanctioned. There are basically three types of payments. One is a lump sum where in the entire amount is paid at one go to the applicant. The second type is the monthly installment where in the applicant receives a fixed monthly payment for the entire period of his/her life. The third mode would be the line of credit payment.
Another important bit of reverse mortgage info is that the loan advances against reverse mortgage is considered as liquid assets and in case the amount is kept in the personal account of the homeowner beyond the calendar month in which it was received. In that case, if the homeowner is under any Medicaid or similar program and the income exceeds the maximum limit set by such programs after taking into consideration the loan advances, then the homeowner will lose the benefits that he is eligible for.
Reverse mortgage is sort of a loan which is extended to senior citizens against their property. It gives the option for senior citizens to convert an illiquid asset into continuing cash flow in the form of loan advances. The most important aspect of reverse mortgage is that the homeowners can continue to stay in their homes for as long as they live.
What is the difference between mortgage and reverse mortgage? Well, in a mortgage, a lump sum amount is borrowed initially against the indemnity of the house, and it is paid back in monthly installments, some part to cover the principal while the rest covers the interest. Thus, the home is the security which is pledged to the financial institution against which the loan was given to you. In the case of reverse mortgage, the home is already owned by you and you pledge this property for loan. The bank will ensure a cash flow for the homeowner for as long as they want.
Let us take an example of reverse mortgage. Let us consider that a senior citizen takes a reverse mortgage loan. He will then be getting monthly payments or a onetime lump sum payment based on the interest rate prevailing at that point of time. They can continue living in the home till the time of death or when the decide to move out of the property or sell the property. Post death or when they decide to sell or move out of the property, the reverse mortgage loan becomes due. Then the heir to the house will have the choice to pay back the loan amount and reclaim the house or otherwise, the property will be sold off by the bank and any amount in excess of the loan outstanding will be given to the heir. But in case the value of the property is less than the loan outstanding, the bank bears the risk and the heir will not have to pay anything.
The homeowner has to ensure that taxes and insurance premiums against the property are clear. Any lapse on the part of the homeowner could cause a default in the reverse mortgage agreement.
One good thing about reverse mortgage is that there is no restriction on the use of loan advance. The funds can be withdrawn and invested in some instrument or can be spent as deemed fit by the homeowner, there is no legal restriction to it. However certain federal government backed programs do have some restrictions regarding how the loan advances can be spent.
There are however other options to reverse mortgage. Once could be that you sell the property and move to a smaller house or to a less expensive location. However, selling and moving costs can be quite high, one should take these into consideration.
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