If I were to name the biggest hurdle to get over, with prospective clients in the reverse mortgage business, it would have to be the closing costs.
I believe I'm a poor salesman. As such I dive right in and tell my customers straight away, "The closing costs for your reverse mortgage will be higher than you might think".
Reverse mortgages, which are insured by HUD, have high closing costs for multiple reasons... It starts with the lender charging costs based on the home's value. Forward mortgages charge costs on the actual loan amount, which is going to be less than value.
Also, the lender charges a fee for originating the loan called (no surprise) an origination fee. this can be 1% higher than forward mortgages. Finally, FHA's mortgage insurance premium is 2% of valuation, up to $417,000.
You don't need to pull out the calculator to get the basic gist... Costs are not so customer relations friendly.
As far as the origination fee goes, one could make the case that it is not more expensive than a forward mortgage. The difference is forward mortgages build the fee into the rate.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
To put this into perspective, a seventy year old customer with a two hundred thousand dollar home would be entitled to borrow roughly $130,000 with an FHA insured mortgage.
Fannie Mae offered a reverse mortgage product until September of this year. It discontinued it. You know why? Everyone took the FHA product because it offered far more money than the Fannie product. The same borrower would have received less than $100,000 on the Fannie product.
The HUD backed product is far more potent than the other products because the insurance covers lender losses. With their bets hedged reverse mortgage lenders could simply lend more money.
The biggest danger to a lender is the possible event that more is owed on the home than the actual value. The mortgage insurance covers lenders in this event.
Yes, people are going to moan and groan about the cost to get a reverse mortgage. They will do so until doomsday, but remember, these costs are the mechanism that solves financial problems for so many seniors.
I believe I'm a poor salesman. As such I dive right in and tell my customers straight away, "The closing costs for your reverse mortgage will be higher than you might think".
Reverse mortgages, which are insured by HUD, have high closing costs for multiple reasons... It starts with the lender charging costs based on the home's value. Forward mortgages charge costs on the actual loan amount, which is going to be less than value.
Also, the lender charges a fee for originating the loan called (no surprise) an origination fee. this can be 1% higher than forward mortgages. Finally, FHA's mortgage insurance premium is 2% of valuation, up to $417,000.
You don't need to pull out the calculator to get the basic gist... Costs are not so customer relations friendly.
As far as the origination fee goes, one could make the case that it is not more expensive than a forward mortgage. The difference is forward mortgages build the fee into the rate.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
To put this into perspective, a seventy year old customer with a two hundred thousand dollar home would be entitled to borrow roughly $130,000 with an FHA insured mortgage.
Fannie Mae offered a reverse mortgage product until September of this year. It discontinued it. You know why? Everyone took the FHA product because it offered far more money than the Fannie product. The same borrower would have received less than $100,000 on the Fannie product.
The HUD backed product is far more potent than the other products because the insurance covers lender losses. With their bets hedged reverse mortgage lenders could simply lend more money.
The biggest danger to a lender is the possible event that more is owed on the home than the actual value. The mortgage insurance covers lenders in this event.
Yes, people are going to moan and groan about the cost to get a reverse mortgage. They will do so until doomsday, but remember, these costs are the mechanism that solves financial problems for so many seniors.
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2 great locations to aid possible reverse mortgage candidates in Texas get a grasp of and help decide if the Texas reverse mortgage is a viable option click on either of the 2 links in this section.
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