Understanding how a reverse mortgage is serviced will help you as a mature borrower to make effective decisions when choosing the program that is right for you. A reverse mortgage or commonly known as a Home Equity Conversion Mortgage or HECM, is a special equity mortgage which assists borrowers over the age of 62.
The reverse mortgage program enables you to borrow money against you current residence and receive payments, in the form you like. You can receive your payment monthly, lump sum, in a line of credit or a combination of payments. Each payment option should be carefully considered because the loan must be repaid if you move out or if you die.
The reverse mortgage program is a U.S. Department of Housing (HUD) and Urban Development and a Federal Housing Administration (FHA) initiative which was started in 1990. The program was started to help borrowers stay in their home while maintaining their way of life.
The reverse mortgage program offers diverse subprograms such as:
• HECM for Purchase – allows you to purchase a new home.
• Fixed Interest Rate – allows you to know the rate for the life of the loan.
Updates and revisions to the overall reverse mortgage program are constantly being made to ensure you and your asset is protected. The Obama Administration has made new updates and revisions including increasing the loan limit from $417,000 to $625,500 and making lending counseling mandatory.
Servicing a reverse mortgage is just like servicing a traditional forward mortgage. A lender who holds the loan is the servicer and therefore any account maintenance such as statement mail-outs, account inquiries and updates, and loan disbursements (payments to you the borrower) occurs over the life of the loan. Each servicer, lender, has a fee they assess for your loan but with a reverse mortgage the lender can charge you no more than $35 per month.
Again the service fees and servicing policies depend on the reverse mortgage lender you select so be mindful of their policies and fees and do not be afraid to shop around.
Other items you should be aware of when researching a reverse mortgage include the program requirements and the various fees.
The requirements of the reverse mortgage program are:
• You must be 62 years or older
• You must own the property being used outright or have a low mortgage balance
• The home being used must be your primary residence
• You must meet with a HUD approved HECM counselor.
The fees for a reverse mortgage are:
• Origination fees are the fees paid to the lender for originating the loan. The origination fee can be no more than $6,000 per home.
• Closing costs come from third parties for items such as appraisals, title search, insurance, surveys, inspections, recording fees, mortgage taxes, credit checks, and other miscellaneous fees.
• Mortgage insurance will be charged at closing and tied into your loan. 2% percent is charged upfront and an additional 0.5 percent per year collected monthly.
• Interest rates can be adjustable or fixed and vary depending on the market.
A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” Please call (866) 683-3690 or complete our website www.ReverseMortgage360.com.
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