What’s the difference between walking into a huge commercial mortgage bank and working with a small, independent broker? On the surface, it may seem like a lot.
Yes, the big bank may have a big sign, dozens of loan experts at your service and a national advertising presence.
But when it comes to securing the best rate for your reverse mortgage loan, and ease of working through the loan process, you’ll actually have many more options by going through a mortgage broker.
Plus, your loan is likely to end up being serviced by the same company in the end, anyway.
Reverse Mortgage Broker Benefits
Because brokers typically work with many different lenders, they can offer a whole range of different products and options that are available in the marketplace.
In shopping for a reverse mortgage, you’ll have several choices when it comes to the type of loan you ultimately secure. Under the Department of Housing and Urban Development’s federally-insured Home Equity Conversion Mortgage (HECM) program, borrowers can take out a fixed rate or adjustable rate loan.
HUD also offers a couple of different product types. Its HECM Saver product comes with lower upfront costs, but a lower amount of loan proceeds in return, versus its Standard product, that will allow borrowers to access a higher percentage of their home equity, but comes with a greater upfront mortgage insurance premium.
The Federal Housing Administration sets basic reverse mortgage requirements such as a minimum age of 62 as well as the home equity and home maintenance standards that must be met.
All borrowers must continue to pay property taxes and maintain homeowners insurance for the duration of the loan.
But like in securing any loan, reverse mortgage lenders vary in some ways such as the interest rates they offer and the origination fees they charge.
While one bank may offer a higher rate and no origination fee, another might offer a lower rate with a fee built in.
Big lenders are stuck with one outlet for the loan, while brokers can expand the reverse mortgage choices a borrower will have.This means a more competitive interest rate option, because a broker can work with the lender that has the lowest rate.
Working with an independent broker versus a big bank could also offer a higher level of customer service and a quicker process overall. Rather than having to adhere to a strict corporate schedule or complex customer service systems, a smaller independent business often means less time waiting in line and a more personal approach to service.
The broker is also likely to be specialized in reverse mortgages, rather than a big lending institution that works with borrowers on dozens of different loan products.
It’s also the broker’s job to interact with the lender, which can save both time and headaches for the borrower when it comes to paperwork and processing.
Ultimately, the HECM reverse mortgage comes with its government guarantee whether you work with a broker or banker, making the product safe regardless of where it is originated. Most loans also end up with just a handful of reverse mortgage servicers, regardless of whether the loan started with a broker or a bank.
But because getting a reverse mortgage is a big decision for anyone considering it, it’s important to work with someone you trust who can answer your questions in a timely manner and can walk you through the ins and outs of the loan.
Are you interested in working with a reverse mortgage broker who can help you through the loan process? Be sure the company is a member of NRMLA. (National Reverse Mortgage Lenders Association)
|Written on 6/10/2013 by Michelle Turner.|