What is a Proprietary Reverse Mortgage? 

A proprietary reverse mortgage is like other types of reverse mortgages in that it is a loan that converts your home’s equity into cash. However, what makes a proprietary reverse mortgage unique is that it is offered and insured through private lenders. Because of this, the loan isn’t restricted by Federal Housing Administration (FHA) lending limits, meaning you can access more funds without paying upfront fees; hence, they’re often referred to as jumbo reverse mortgage loans. 

How Does a Proprietary Reverse Mortgage Work? 

To qualify for a proprietary reverse mortgage, you must be at least 62 years old, and your main residence must have enough home equity established to meet the lenders requirements. Once you’ve successfully acquired a loan, it will first pay off your current mortgage. Any remaining proceeds are then provided to you in a non-taxable lump sum, which you have the freedom to use on anything. 

What are the Benefits of a Proprietary Reverse Mortgage?

There are a few different types of reverse mortgages available to homeowners, meaning choosing the best option for you can be confusing. Establishing what benefits most align with your wants and needs can make the decision clearer. Here are the advantages you can expect with a proprietary reverse mortgage: 

A Greater Amount of Funds: Proprietary reverse mortgages aren’t restricted by FHA lending limits, meaning you can receive larger loan amounts compared to other reverse mortgages.  

No Strict Guidelines for How You Use It: Unlike a single-purpose reverse mortgage, proprietary reverse mortgages give you the freedom to use funds from your loan however you wish. This means your payments can go toward home renovations, paying off student debt, medical bills, living expenses, travel, and more.  

Freedom From Upfront and Monthly Mortgage Payments: Other types of reverse mortgages typically charge an upfront mortgage fee, but this option avoids this issue. Instead of paying the 2% fee on a HECM loan for a $400,000 home, a proprietary reverse mortgage allows you to save $8,000 you would otherwise lose. Additionally, this loan pays off your existing mortgage and does not require you to make monthly payments on it until it comes due. Just make sure to continue to pay financial obligations such as property taxes and homeowners insurance.   

A Proprietary Reverse Mortgage is in your Reach

With proprietary reverse mortgages, the options are limitless. Not constrained by FHA limitations, flexible in how it’s used and lenient on mortgage payment requirements, this loan is a wonderful option for many homeowners over the age of 62 looking for extra income.  

Interested in learning more about these loans and more? Millennial Title is well versed in various reverse mortgage options. Contact the team at Millennial Title and get help finding a solution that’s right for you. 

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What is a HECM Loan?

A HECM loan—or Home Equity Conversion Mortgage—is a reverse mortgage that leverages the home’s equity as supplemental income, which can then be used at the borrower’s discretion to take care of living expenses, medical bills, and more. A HECM loan is unique from other types of reverse mortgages because it is the only one insured by the Federal Housing Administration (FHA) —meaning it offers the most protection to borrowers. Additionally, this type of loan is nonrecourse; therefore, you’ll never owe more than what your home is worth even if your home’s equity drops after receiving the loan.

HECM loan amounts are based upon:

• Age of the youngest borrower or eligible non-borrowing spouse
• Current interest rates
• The home’s appraised value
• The HECM FHA mortgage limit, which is currently set at $1,089,300

Eligibility

Offering the most protection to borrowers and the most spending autonomy, it’s no wonder that the HECM loan is one of the most popular choices for borrowers. Furthermore, HECM loans are not dependent upon credit score, offering financial requirements that are much more slack than other loans. That being said, there are a few requirements that must be met to receive the benefits of this loan.

To be eligible for a HECM loan, the borrower must:

• Be 62 years old or older
• Use the appraised property as their primary residence
• Have their property approved by the U.S. Department of Housing and Urban Development as a 2–4-unit single-family home, manufactured home, or condominium.
• Fully own the property or have a small mortgage balance
• Keep up with all federal debt payments
• Be able to pay all upfront and ongoing costs, including the required HECM counseling

For retirees 62 years or older, HECM loans provide many financial benefits.

How to Apply

The application process for a HECM loan begins by going through an FHA-sponsored bank. To find a bank that meets FHA standards, the U.S. Department of Housing and Urban Development provides an easy-to-use lender list. Follow these simple steps to locate an approved lender near you:

1. Go to the HUD Lender List Search
2. Select your state, county, and zip code (you can also choose the radius it will search within)
3. Scroll down
4. Uncheck “Title 1 Property Improvement”
5. Check “HECM”
6. Click “Search

Millennial Title is Your Partner for HECM Loan Closings

Highly protected, accessible, and flexible, a HECM loan is an excellent source for supplemental income. At Perpetual Title, our experienced staff works closely with FHA-approved lenders to ensure your loan closing is completed as smoothly as possible. Contact Perpetual Title today to take your first steps towards acquiring a HECM loan.

The post What is a HECM Loan? first appeared on Perpetual Title.

Upfront Costs

HECM Counseling

To acquire a reverse mortgage, borrowers are required to receive counseling from an HECM counselor who has been approved by the U.S. Department of Housing and Urban Development. While a counseling agency may charge you a reasonable fee, they are required to address your personal financial situation and cannot charge you a fee you’re unable to afford.  

 Origination Fees

Lenders typically charge an origination fee to process, underwrite, and close your loan. According to Investopedia, an origination fee is typically 0.5% and 1% of the loan amount. It is also useful to note that origination fees may not exceed $6,000. 

Appraisal Fees

When preparing to borrow a reverse mortgage loan, you’ll want to be prepared to have your home appraised by an appraisal management company. This step’s cost will vary depending on conditions such as the size and age of your home. 

Initial Mortgage Insurance Premium

An initial Mortgage Insurance Premium—initial MIP— is paid to the Federal Housing Administration and guarantees you will receive your expected loan advances. According to the U.S. Department of Housing and Urban Development, the initial MIP will be 2%.  

Third Party Closing Costs

Fees for loan recording, credit checks, and title insurance will need to be paid before finalizing your reverse mortgage. To keep these costs organized, your lender can provide you with a comprehensive breakdown of all the charges within your closing disclosure.  

Ongoing Costs

Annual Mortgage Insurance Premium

After your initial mortgage insurance premium payment, you’ll begin making an annual payment to your MIP. These payments will be 0.5% of the outstanding mortgage balance. It is also possible to roll MIP costs into your reverse loan, meaning it will accrue interest for the life of the loan. 

Servicing Fees

Lenders are responsible for sending your account statements, distributing your loan proceeds, and helping you meet your loan requirements. Thus, they’ll need to be paid servicing fees. This will cost no more than $30-$35 depending on if the interest rate adjusts monthly.  

Property Charges

To qualify for a reverse mortgage, the Federal Housing Administration must be able to trust that you can pay long-term property costs. This includes regular payments to charges such as homeowners insurance, property taxes, and—depending on your location—hazard insurance premiums. 

Be Prepared for Reverse Mortgage Closing Costs

If you want to use your home’s equity to your benefit, it’s time to apply for a reverse mortgage. Knowing what closing costs to expect will help you be better prepared to qualify for the loan. Need help taking the first step? Perpetual Title’s knowledgeable team is more than happy to answer any questions you may have regarding reverse mortgages or any other areas of our expertise.   

The post Reverse Mortgage Closing Costs: What to Expect first appeared on Perpetual Title.

What is a Reverse Mortgage?

Unlike a traditional mortgage where you pay the bank monthly for your home, a reverse mortgage is backed by using your home as a security. If you have any outstanding mortgage payments, the remainder of it will be paid off by the reverse mortgage. After that, the remaining funds go to the borrower. To attain a reverse mortgage, there are a few requirements to consider:  

• The borrower must be aged 62 years or older (55 in some states). 
• The home’s equity must be sufficient for the loan. Typically, 50% of accumulated equity is required.  
• Property taxes, homeowners insurance, and basic home maintenance costs must be paid. 
• The property in question must be the primary residence for the borrower for at least a year. 

The 3 Types of Reverse Mortgages

The next step after determining if you are eligible to receive a reverse mortgage loan is choosing what kind to apply for. With three choices to choose from, each option has a unique set of advantages that can aid you in determining which will work best for you. 

Home Equity Conversion Mortgage (HECM)

Home equity conversion purchase offers the most protection for borrowers because it is insured by the Federal Housing Administration (FHA). These loans are nonrecourse, meaning the borrower never owes more than what their home is worth, even if the value drops after receiving the loan. HECM loans also have slacker financial requirements than other loans such as not being dependent upon credit score. HECM’s offer the option of lump sum payments through a fixed rate or adjustable rates where equity can also be turned into lump sums, monthly distributions, a line of credit, or a combination of each. Money can then be used on anything the borrower chooses such as paying for school tuition or debt, taking care of medical expenses, supplementing income, and more.  

Proprietary Reverse Mortgage 

Proprietary reverse mortgages are similar to HECM loans in that they can be used for whatever expenses you wish. However, unlike the conventional institutions HECM loans use, proprietary reverse mortgages are provided by private lenders, meaning they are exempt from FHA regulations and paying mortgage insurance. Therefore, lenders can offer amounts higher than the federal limit, which is why these loans are also called jumbo reverse mortgages. For those who want autonomy over how they use their loan without having to deal with federal restrictions and insurance, higher loan limits, or a combination, a proprietary reverse mortgage may be the right choice.  

Reverse for Purchase Mortgage

Also called a HECM for purchase, a reverse for purchase loan is unique in that its sole purpose is to be used to purchase a home through a single transaction. Once the borrower places a down payment of roughly 40-50% on the home they wish to buy, the reverse for purchase loan immediately resolves the payment by offering to loan up to 50-60% against the home equity. Thus, the slate is wiped clean, and the home is purchased in a single transaction. Those looking to move closer to family, downsize, or want to maximize on their purchasing power during homebuying would be well suited a reverse for purchase loan.  

Take Advantage of Reverse Mortgages

Whatever reverse mortgage you think is right for you, we want to help find the resources you need to take advantage of the opportunity. Perpetual Title is uniquely suited to assist you by offering a team of experienced professionals across the country that can help you navigate each step of the process. Want to learn more about our lending partners? Click here to learn more as well as discover Perpetual Title’s other vast areas of expertise. 

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