How To Shop For A Reverse Mortgage

Learn the main 3 things you need to do when shopping for a reverse mortgage and listen to our podcasts as well.
How To Shop For A Reverse Mortgage

In case you didn’t know, I have a 30 minutes radio show that airs on KLZ AM 560 every Thursday afternoon at 2:30 PM and replays on Saturday and Sunday.
On October 18th, 25th and November 1st I discussed how to shop for a Home Equity Conversion Mortgage (HECM).This is the name for the FHA insured reverse
mortgage.

You can listen to the podcasts here.

But in case you don’t have time to listen, I’m providing a semi-brief summary below.

The three shows are broken down as follows:

10/18/18 – The general steps you will go through

1. Ask yourself – What it is that we are hoping to accomplish with a reverse mortgage?

  • Do we just want to pay off an existing mortgage? Have more financial freedom by not having a mortgage payment? (You will still need to pay the property
    taxes and homeowners insurance as well as maintain the home).
  • Maybe we’d like additional income from the reverse mortgage?
  • Without a mortgage payment and/or additional income, maybe we could retire?
  • Do we want to use a reverse mortgage to down-size/right-size and buy a home near family?
  • Should we establish a Line of Credit (LOC) for financial planning purposes & long-term security?

2. Try to educate yourself as best you can.  Research on-line, but DO NOT give out your Social Security number.  Try not to even give
out your phone number.  You want to control when you call people.  Some of these “informational sites” are just farming your information and
sell it to numerous loan officers and companies who will call you.  Some of these sites will sell your information to three or four different people.
Imagine if you gave your information to just three sites that did this, you could be getting calls from ten different people.

Here are a few web-sites with good information that won’t harass you:

I don’t recommend going to the AARP web-site because it is out dated and does not reflect updates to the reverse mortgage program such as Financial assessment
from 2015 or even the Non-Borrowing Spouse (NBS) rules from 2014.  The most recent article I found there is dated May 2015.

3. Contact a HUD approved counselor.  If you talk with a lender directly, they should be able to provide a list of local counselors along with another
list of counselors that provide counseling over the phone.  The lender should NOT give you just one counselor to call and should definitely NOT
tell you that he/she will have the counselor call you.  You choose who your own counselor and if you want to talk with them in person or over
the phone.

4. Get a quote for your situation.  Most web-sites that offer a calculator use it as a way to get your phone number but there is an on-line calculator
at the NRMLA site at https://www.reversemortgage.org.  The good thing about this one is that they
do not require your information, but the down side is that the costs and interest rates they reflect are typically higher than most lenders.
It’ll give you good general information about what the numbers will look like, but for the most accurate quote, you’ll want to call a lender directly
for a quote.

5. It’s time to talk directly with a loan officer.  But who do you call for a quote?
Whomever you decide on they should have these four attributes:

  • Work with someone local and in person, who is willing to come to you.
  • The loan officer should have at least five years’ experience in reverse mortgages.  He or she should also be a Certified Reverse Mortgage Professional
    (CRMP).  You can learn more about this designation on the NRMLA web-site above.
  • Work with a company that’s been in business for at least ten years and has an “A” rating with the local Better Business Bureau (hint – they should
    be a member).  They should also be a member of the National Reverse Mortgage Lenders Association, (NRMLA).
  • Only work with someone you’re comfortable with and who has testimonials from satisfied customers.

*** Note ***

Steps #3 and #5 can be switched.  More often than not, most people contact a lender before they visit the counselor, but it’s your call.  Do
what’s best for you.

10/25/18 – What do these numbers mean?

Now that you have a quote, what do all these numbers mean?  This is why I feel that meeting with a loan officer in person is so important.  If
you simply call and have the lender send you a quote over e-mail, it can be very difficult to make heads or tails of what you’re looking at. 

I’m not going to go into specific forms in this article, but you want to look at closing costs and interest rates because the loan officer should be able
to work with both to get you the best overall deal.

Closing costs can be broken down into three sections:

  1. Upfront Mortgage Insurance Premium
  2. Origination Fee
  3. Other Charges

Upfront Mortgage Insurance Premium (Upfront MIP) – This is a fee charged on all HECM loans.  FHA charges an upfront fee equal to 2.0% of the
value of the homme up to the maximum claim amount of $679,650.  For example, if you have a homme valued at $400,000, the upfront MIP would be
$8,000.00 ($400,000 x 2.0% = $8,000.00).  This fee is charged no matter the actual amount of funds you draw from the reverse mortgage.

Origination Fee – This is one fee that can be negotiated with the lender although in some cases it may help maximize the cash available by
getting a lower interest rate and being charged an origination fee. (I’ll talk more about that in a future blog). 

FHA places limits on the amount a lender can charge for an origination fee.  They can charge 2.0% of the first $200,000 in home value, and 1.0% of
the value thereafter up to a maximum of $6,000.00.  FHA allows a minimum origination fee of $2,500.00 regardless of value.

Other Charges – This line encompasses all other fees such as appraisal, title insurance, closing fee, credit report, flood certification, etc.

These three lines totaled together are the “closing costs” for a reverse mortgage.  Some lenders may want you to pre-pay the appraisal and credit
report while others will not ask you pay any money upfront. 

You will want to make sure to take these costs into account when you look at the interest rate charged and the amount of money available from the reverse
mortgage.

11/1/18 – How do the interest rates work on reverse mortgages?

Borrowers who get HECM loans have three interest rate options:

  1. Fixed Rate – Rate will not change over the life of the loan.
  2. Annually Adjustable Rate – Rate will adjust annually.
  3. Monthly Adjustable Rate – Rate will adjust monthly.

One difference between interest on a normal “forward” mortgage and a reverse mortgage is that no matter if the borrower chooses a fixed or adjustable rate,
they don’t have to pay it out of their pocket on a monthly basis.  They are still charged interest, but they are not required to pay it.
The interest accrues and is added to the loan balance and paid when the last homeowner permanently leaves the home.

While getting the lowest interest rate is important to try to keep the loan balance from growing so quickly, it is also important in order to receive the
most money from the reverse mortgage.

The amount of money that a homeowner can qualify for on a HECM loan is based on three factors:

  1. The age of the youngest spouse/homeowner
  2. The value of the home up to the maximum lending limit of $679,650
  3. The “expected” interest rate

Since this article is about shopping for reverse mortgages, I’m not going to go into detail about anything other than the “expected” interest rate.

There are two interest rates you will see on every quote you receive.  One Is called the “initial interest rate” and the other is called the “expected
interest rate”.  

If you choose the fixed rate option, these two rates will be always be the same.  However, on the adjustable rate options, they will most likely be
different.

The “initial” rate is the rate the borrower is charged once the loan is in place.  The “expected” rate is the one we use to determine the amount of
loan a borrower can qualify for.

FHA insures HECM loans so they try to project what the interest rates might be in the future when calculating the amount they will allow the lender to
loan.  They call these projections “expected” interest rates.  These are longer term projected rates (10 years) than the shorter term “initial”
rate (one month for the monthly adjustable and one year for the annually adjustable rate). 

The lower the “expected rate”, the higher the loan amount.   Conversely, the
higher the “expected rate”, the lower the loan amount.

Both rates are tied to an index called the London Interbank Offered Rate (LIBOR).  Lenders add a “margin” to the index to arrive at both final
rates.  For example, if the lender margin is 2.00% and LIBOR index is 2.00% the resulting interest rate the borrower is charged would be 4.00%. 

The margin is the same for both the initial and expected rates.  The margin never changes once the loan is signed.  However, the LIBOR index
will.  With HECM loans, the expected rate can be locked once the application is signed, which is good because if it increased while your loan
is being processed, your loan amount would decrease.

When shopping for a reverse mortgage loan, prior to signing an application, you want to pay attention the “margin” because this is the portion of the equation
that cannot change.  Remember, the LIBOR index can change, but the margin cannot.  If you contacted Lender #1 last week and received a quote
with an expected rate of 4.25%, then contact Lender #2 this week for and received a quote with an expected rate of 4.375, you may assume Lender #1
has the better deal.

However, if you pay attention to the margin, you might notice both lenders have the same margin.  How can this be when the rates are different?
It’s possible the index increased by one-eighth of a percent from one week to the next.  If you went back to Lender #1, their rate would now be
the same as Lender #2 because they have the same margin.

I know this can all be very confusing, but it will become clear over time.  Please take a few moments to listen to my podcasts or just call me directly
at 303-467-7821.

Picture of Bruce Simmons

Bruce Simmons

I absolutely love what I do - working with senior homeowners to help them live a more comfortable, flexible and secure retirement. I have the absolute best customers in the world, and even though I worked in the forward mortgage business for a number of years, I could never go back to doing conventional loans. I'm a 100% reverse mortgage specialist.

5.0

My wife and I are retired and had a mortgage that was quite high. We contacted Bruce regarding a Reverse Mortgage and were pleased with his knowledge and experience. He made the whole process very easy and explained everything along the way. Since then, I have had a couple of questions and contacted him regarding the RM. Bruce has always been very responsive and returned our calls within minutes. We couldn't be happier having used Bruce for the Reverse Mortgage and highly recommend him.

Bruce has been serving my interest over and above what one might expect during the whole process of handling my reverse mortgage dating back to 2010 and continues to be available at present whenever a question may arise. He is one of the most reliable, trustworthy and knowledgeable experts regarding reverse mortgages that I have had the privilege to do business with! I would highly recommend Bruce to anyone who is considering a reverse mortgage. Thank you Bruce!

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

Gerald Cook
Gerald Cook
5.0

Bruce did our original reverse mortgage and has also refinanced it twice. He works hard to get the best deal possible while making it as easy for us as possible. When our first refinance received a low initial appraisal, Bruce helped the appraiser find better information and increase the appraised value. He's the best.

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!

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John Addante
John Addante

Left us a 5 star review

My wife and I are retired and had a mortgage that was quite high. We contacted Bruce regarding a Reverse Mortgage and were pleased with his knowledge and experience. He made the whole process very easy and explained everything along the way. Since then, I have had a couple of questions and contacted him regarding the RM. Bruce has always been very responsive and returned our calls within minutes. We couldn't be happier having used Bruce for the Reverse Mortgage and highly recommend him.

Bruce has been serving my interest over and above what one might expect during the whole process of handling my reverse mortgage dating back to 2010 and continues to be available at present whenever a question may arise. He is one of the most reliable, trustworthy and knowledgeable experts regarding reverse mortgages that I have had the privilege to do business with! I would highly recommend Bruce to anyone who is considering a reverse mortgage. Thank you Bruce!

I met Bruce from a referral who just love what he did for them on their Reverse Mortgage, So I contacted Bruce and told him my story and he came up with a great Reverse Mortgage for me and my needs and now I am living good and not worrying about Finances anymore. He had it done in a timely manner. If you are looking for the MAN to help you get the best Reverse Mortgage you need to call him and hope you let him help you.

Bruce is one of the most professional, knowledgeable and efficient experts I have worked ŵith ever in any field. He is fast to answer and always ready to help...and he's a great guy!

I was hesitate about getting a reverse mortgage until Bruce Simons put my mind at rest. He is easy to work with, extremely knowledgeable and efficient. Things get done and he will make sure that you understand every part of the process. I interviewed several other people and he was hands down.....The only choice.

Doing a Reverse Mortgage is a major decision, when working with Bruce he came out personally to go over every thing in detail, there was no pressure to finalize the transaction, I had even put the loan on hold for awhile even though I had locked in my rate, I had called Bruce off and on for a few weeks to ask questions that I had concerns about and he was always available to talk to me. In the end it gave me time to feel comfortable about my decision to move forward with the Reverse. Bruce was very pleasant to work with and would certainly recommend Bruce if you are going to consider a Reverse Mortgage.

Bruce Simmons at American Liberty is one of the best in the reverse mortgage industry. I have known and worked with him for years and he always does a great job. You are in good hands with Bruce and know that he will take good care of you or your loved ones every step of the way.

Best thing I ever did! Bruce Simmons at American Liberty Mortgage is the best. He is always there to answer your questions, and can easily explain the whole idea of a Reverse Mortgage. He takes the time and goes through the entire process with you. It worked out so well for me. Thank You Bruce!

We had researched Reverse Mortgages for 5 years and after hearing about Bruce Simmons and meeting with him, we finally decided to move forward with the Reverse Morgage. It has been over a year now and we are still very pleased with our decision. We think Bruce is very professional, knowledgeable and honest. Thank you, Bruce, for all your help.

I first met Bruce Simmons 2017. I found him on the internet. I was looking for someone local. I called him and explained I was only looking into doing a reverse mortgage, so I did not want him to think this was something I was ready to do. Bruce was friendly, very open about the basics of a reverse mortgage. Bruce came to my home and presented the figures and other details that he could offer. The first thing that impressed me was this was not a hard sell, more of a informational meeting. He was very open about all of the details, and answered my questions without hesitation. What really was evident was he was establishing a relationship with me, and I realized he knew I would not take the loan at that time. There was not enough equity in my home, and I would have to bring money to the table. Although I was not ready to do a loan, Bruce assured me he is always available for questions. Four years later, I finally did do a reverse mortgage, and I couldn't be happier with having done it. I have done away with a mortgage payment which allows me to fund my retirement account with that mortgage payment. We did some much needed landscaping with our cash out transaction, and will move on to improvements inside of the house. My reverse mortgage has a line of credit, and I feel sense security knowing it is there if I need it. Bruce explained that a reverse mortgage is not for everyone, but I feel certain that he paved the way for a strategy that worked for me. I will definitely do a refinance when the time is right. I will check in with Bruce to be sure what the benefits are when I do it again.

I have worked with Bruce Simmons for 15 years. Bruce is one of the best in the industry. He is extremely knowledgeable, kinds and detailed in what he does. His clients love working with him and trust him to help them with their Reverse Mortgage loans. I would recommend Bruce to anyone I know that is thinking about or wanting to do a Reverse Mortgage. He will always take very good care of the customers and make sure their needs are met! Class act and one of the best in the industry by far!