With over 200 active reverse private mortgage lenders available in Ontario, it can be difficult for consumers to decide who to work with.
Questions Consumers Should Be Asking Reverse Mortgage Lenders
To get a better idea of what a lender is offering, consumers will want to ask reverse mortgage lenders several different questions. Consumers should ask about interest rates, closing costs, and other fees, like service charges and the loan origination fee. Since these fees vary by lender, they are always important to discuss. Borrowers that believe they are being overcharged should address their concerns with their loan officer or begin considering other lenders.
To give consumers a better idea of how much a reverse mortgage will cost, lenders should be willing to provide borrowers with a total annual loan cost (TALC) disclosure. This document will outline the annual costs associated with the loan and help borrowers determine whether these costs are affordable.
Consumers will also want to ask about their different payment options. Borrowers may choose to accept cash as a lump sum, credit line, monthly payments, or as a combination of these options. When choosing to receive cash in installments, borrowers must also decide whether they want to receive set monthly payments for as long as they occupy their home or whether they would prefer to receive set payments for a specific about of time. The way borrowers choose to receive their payment will affect the amount of money they will receive from their loan, making it an important thing to discuss with reverse mortgage lenders.
Recognizing the Best Reverse Mortgage Lenders
The best reverse mortgage lenders are those who are licensed and approved by the Federal Housing Administration (FHA). Reputable lenders should also take the time to explain reverse mortgages to their borrowers. Depending on a person’s age and current financial situation, it may be more beneficial to wait to apply for a loan.
For instance, younger borrowers who are not yet struggling with a limited cash flow would be able to withdraw more equity if they were to wait several years before taking a reverse mortgage. Older borrowers, as well as those in serious need of cash, are generally those that benefit the most from these financial products.
Lenders should also be willing to discuss fees and refrain from trying to sell borrowers other financial products. As of 2008, the Housing and Economic Recovery Act (HERA) prohibits reverse mortgage lenders from selling their borrower’s insurance or annuities. Lenders that require their borrowers to buy these products should be avoided. Borrowers should also be wary of lenders who try to hide certain fees or are unwilling to discuss costs.
Communication is essential to informed borrowing. Borrowers should be able to discuss their questions and concerns with his or her lender. The best lenders are not only those that offer affordable loans. They are the ones that educate their borrowers and protect their best interests throughout the loan process.