Guide to Choosing Reverse Mortgage Lenders in Ontario

With over 200 active reverse private mortgage lenders available in Ontario, it can be difficult for consumers to decide who to work with. Its critical to pick the right lender when considering a mortgage Mississauga loan can make or break your future home ownership dreams if done incorrectly.

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.

About Private Mortgage Lenders in Ontario

For most individuals, a house is the most expensive acquisition that a person makes in his lifetime. More often than not the house is purchased on money borrowed from professional lenders. It is therefore imperative to know exactly what one is in for when one is getting their first mortgage in Ontario.

Broadly speaking, the private mortgage lender lends you the money that you require for your house and expects you to pay back the same within a specified time along with interest. There are two basic types of players in the mortgage market: lenders and brokers. You have the option of going directly to an authorized lender, or you could approach a mortgage broker who helps you obtain the mortgage from any of the several lenders in the market. It is a jungle out there and it might be helpful to have someone who can help you navigate it. But remember that the fee that the mortgage broker charges may be higher than what the authorized money lenders charges. Also, be aware of the fact that most of these brokers are not licensed and hence are not bound by any regulation.

What Do Private Mortgage Lenders in Ontario Look For?

Private mortgage lenders in Ontario are mainly concerned about your credit report. In a credit report, they scrutinize your debt ratio which is an indicator of your earnings and how much you owe, as well as your overall credit rating. Proof of earnings is another key criterion to decide whether the lender will finally approve your loan amount or not. This information is generally obtained from tax returns and pays stubs submitted by you. To get the mortgage without much hassle, it is important to keep your records clean and unquestionable. But what if you have a not-so-perfect credit report? – Well in that case several other lenders can still give you a loan, by charging you a higher rate of interest. Always make use of a mortgage broker Mississauga expert near you in your region.

Why Do Private Mortgage Lenders Sometimes Turn Down Mortgage Requests?

This may be due to factors such as bad credit reports, low annual income, or even when they are not satisfied with the house that you plan to buy.

How Much of a Mortgage Loan Can You Reasonably Expect From These Lenders?

A kind of thumb rule states that you can get a loan amount that is 4-5 times your annual income. So the more you earn, the bigger the mortgage you are eligible for.

What Is The Process of Obtaining a Mortgage?

You can either approach the lender to get a fair assessment of your situation and ask them how much they are willing to give you and then look for a house in that budget. You can even select a house and then apply to the lender for payment. Whichever way you go, you have to first obtain an ‘Agreement in Principle which states the amount the lender is willing to pay for your house. This document is valid generally for 3 months or so. After this, you are expected to complete the ‘Mortgage Application’ and submit the same with the required documents about your financial stability and creditworthiness. The house is then inspected by a qualified valuer.

After your mortgage application is found to be satisfactory the lender will issue a ‘Mortgage Offer’, or an ‘Offer of Advance’. This document will also state the conditions on which the lender is offering you the mortgage.

What Are The Fees Associated With The Mortgage Application Process?

One is generally required to pay an ‘Administration or Application fee’ for setting up the mortgage. A separate ‘Valuation Fee’ may sometimes also be charged.

Finding a Good Reverse Mortgage Lender

Home Equity Conversion Mortgages, or HECMs, are insured and regulated by the federal government. Because these loans are so strictly regulated, many seniors are under the impression that all lenders offer the same experience. While lenders are limited in the fees they are allowed to charge their borrowers, some reverse mortgage lenders offer significantly better service. Always deal with a reputable mortgage broker mississauga expert.

What Good Reverse Mortgage Lenders Do for Their Borrowers

The best reverse mortgage lenders do not just lend money, they also educate and support their borrowers throughout the loan process. After contacting a lender, seniors should be given a clear explanation of their different options. The Federal Housing Administration (FHA) currently offers two HECM products: the HECM Standard and the HECM Saver. Seniors who wish to purchase a new principal residence with the proceeds of a reverse mortgage can also take advantage of the HECM for Purchase program. To help seniors choose a beneficial loan product, lenders should explain the costs, benefits, and disadvantages of each loan option.

In addition to explaining a senior’s options, a great lender will also explain the borrower’s responsibilities after getting a loan. After closing the loan, borrowers are expected to have homeowners insurance, continue making important home repairs, and pay their property taxes on time. Borrowers who fail to meet these requirements might be asked to repay their loan early. To eliminate future confusion, lenders should also explain repayment. This includes when the loan must be repaid, and how borrowers or their heirs can repay the loan.

Another sign of a reputable lender is flexibility. An honest lender will always be willing to speak with a borrower’s family and financial advisors. Lenders who discourage borrowers from consulting relatives or other financial professionals might not have the borrower’s best interests at heart. To ensure that seniors are making the right decision, reverse mortgage lenders should also explain the importance of HECM counseling and, if necessary, help seniors prepare for their counseling sessions.

Good Lenders Help Seniors Understand the True Costs of Their Loan

In addition to offering superior service, reputable reverse mortgage lenders are also straightforward about fees and long-term costs. To get a reverse mortgage, borrowers will be expected to pay for an appraisal, closing costs, and an origination fee. Because HECMs are insured by FHA, borrowers are also required to pay for mortgage insurance. Fortunately, to help borrowers avoid paying these costs out-of-pocket, lenders typically finance their fees into the loan.

To make the costs of the loan completely clear reverse mortgage lenders are required to provide seniors with a Total Annual Loan Cost (TALC) disclosure. This disclosure serves two different purposes. First, it helps seniors see their expected interest rate and estimated fees. The TALC disclosure also explains the total cost of getting a reverse mortgage over the life of the loan. Lenders who are unwilling to discuss their fees or explain the costs of the loan should be avoided.

Seniors should also be wary of lenders who provide them with incomplete information or try to force their signature on confusing or incomplete paperwork. Getting a reverse mortgage is an important financial decision, and seniors should not feel pressured to choose a loan that is not entirely right for them. The benefit of choosing a reputable lender is that these professionals do not attempt to deceive or control their borrowers. Instead, they work to support and educate seniors throughout the loan process.