Reverse Mortgage Going Mainstream
The reverse mortgage isn't going away, in fact its going mainstream. There are now an abundance of providers out there to choose from, some are banks, some are reputable financial and insurance organizations now offering reverse mortgages and some are reputable local mortgage firms that have opened up or expanded shops to concentrate on this niche product.
Online Reverse Mortgage Information
Then there's the abundance of information on the reverse mortgage that can be found online. CNBC, Bankrate.com, Kiplinger's and others have made their comments known, some not so peachy and each with the story of the perils of the reverse mortgage, the obligatory comment from AARP or National Reverse Mortgage Lenders Association telling folks to do their homework. Look for a follow up set of comments on this website about why some folks look at reverse mortgages with such disparaging comments about the fees involved but do not offer up any of the significant benefits they may bring to their borrowers.
Shop around can mean a couple of things for this product. It can mean compare prices, compare interest rates but it can and should mean to find out who you are getting your product from and make sure they have the understanding of its niche role.
Why Are Reverse Mortgage Fees High?
There will always be differences in fees but they should not be drastic from one provider to another and if you see large differences, know to be a bit cautious. Margins recently adjusted as Fannie Mae, the largest purchaser of packaged reverse mortgages upped the margins since the indexes that reverse mortgages are pinned to have continued to fall. As mentioned in several parts of this site, initial and expected rates for reverse mortgages are tied to either the Treasury (CMT) or to LIBOR and all are close to historic lows. In fact they are so low they almost can't go any lower and hence the need to raise the margin that is added to those indexes so that there is something of substance for the buyer of these loans to make enough money to continue to offer them. Recent 1 year Treasury yields of .37 and .40% were added to a margin of 2.00 for rate of 2.37 and 2.40% respectively. Those kind of rates do not provide a lot of wealth building capabilities for investors or borrowers and therefore the industry moved toward a higher margin of 2.50 and 2.75 to offset the lower index pins.
Understand the title fee differences in each state and county as they pertain to the initial quote received from your reverse mortgage lender. Not all nationwide covering providers include state specific fees in their public facing reverse mortgage calculators. What this means is that an online quote from a national provider will look the same for a reverse mortgage in California as it does in Maryland. In actuality they will not be the same as these states charge different taxes and title fees. A reverse mortgage for the same home value will cost more in Maryland because they charge a recordation tax that California does not include. The amount of cash available from a trusted advisor with up to date calculation capabilities can be much lower than a random internet quote due to the websites lack of ability to pull specific county and state fee structures, so before you choose a national provider, ask them to provide the actual state and county based fees and not just the generic web based calculation as its not a true snapshot of your total costs.
Send this page to a friend ...