Reverse Mortgage Lender – Who Are They?

Reverse Mortgage

As the name suggests it is just the reverse of a mortgage loan scheme. A reverse mortgage is all about borrowing against your property. A reverse mortgage loan is offered in a variety of ways, either as a lump sum or monthly payments. While in any regular mortgage the loan reduces or the equity increases with every installment being paid. It is the reverse in a reverse mortgage scheme, the debt on the house increases with every payment installment received by the borrower.

The scheme is actually meant for senior citizens who rather intend to release their home equity from the property they have purchased in a phased manner. The obligation of repayment is extended until the death of the home owner or until the property is sold by the owner of the house. The home owner not even pays the interest on the amount so borrowed and it adds up to the charge on the property.

While it is possible to acquire more than one mortgage (reverse) on the property where the value of the property increases, in countries like United States you are not suppose to have any other mortgage where you already have a reverse mortgage on the property.

A Reverse Mortgage Lender

• All reverse mortgage lenders should necessarily be a member of National Reverse Mortgage Lenders Association (NRMLA). They are given the license to originate reverse mortgage transactions in particular states. They are required to sign the code of conduct issued by NRMLA.
• NRMLA has a listing of lenders who offer reverse mortgage loans. The given list is published on the net for reference to prospective customers.
• Lenders offer reverse mortgage loans to those old homeowners who are 2 years of age or more.
• A licensed mortgage lender makes a series of installment payments to the borrower which accumulates as a charge against the value of the property. This is unlike a mortgage loan transaction where the borrower will be making the payments to the lender.
• The amount of money offered by the reverse mortgage lender increases with the increase in the age of the borrower.
• Lenders of this loan make clear the nature of properties on which a reverse mortgage is available. Usually cooperative housings are ineligible for mortgage.
• The lenders normally do not restrict the purpose for the mortgage money is used by the borrower.
• The interest is charged by reverse mortgage lender on the amount of loan extended by him. Normally a variable interest is charged.
• The reverse mortgage lenders normally charge what is called a Service Fee Set Aside (SFSA) which is nothing but a few tens of dollars charged every month multiplied by your life expectancy converted into months. This amount is normally deducted from the value of your property and is never available for you.
• You are required to seek counseling from HUD in order to ensure you understand the terms of reverse mortgage and enter into a transaction after perfect understanding to avoid all future troubles both for you and the lender.

I am sure the above discussion has surely made the concept of reverse mortgage very clear. Keep tab on our postings for more information.