Top Tips for Choosing the Best Proprietary Reverse Mortgage Lender

As you reach retirement age, securing your finances to maintain your lifestyle is essential. A proprietary reverse mortgage is one of the most common means of securing your finances after retirement in the US. 

It can provide financial stability and liquidity in retirement. However, choosing the right lender is important. 

This guide will teach you how to find the best proprietary reverse mortgage lenders to meet your financial goal. 

What is a Proprietary Reverse Mortgage 

A proprietary reverse mortgage is a type of private loan service designed for senior homeowners. It is also commonly known as Jumbo reverse mortgage. 

Most people confuse it with the Home Equity Conversion Mortgage (HECM), even though they are quite different. HECM is a federally insured loan service, whereas proprietary reverse mortgage loans are offered by private lenders and are not backed by the government. 

This type of loan is ideal for people who have high-value houses. With a proprietary reverse mortgage loan, you can borrow more money than the limit set by HECM. 

Pros and Cons of Proprietary Reverse Mortgage

A proprietary reverse mortgage has its share of pros and cons. Before starting the lending process, you need to know what it offers. 

Pros 

Here are the benefits of a jumbo reverse mortgage:

• Higher Loan Limit: Since proprietary reverse mortgages are for bigger homes with a higher value, the loan limit is also higher. It offers more funds than HECM loans. 
• Zero Mortgage Insurance Premiums: These loans are not insured by the government, allowing you to save on large insurance premiums. However, you can get private insurance for the loan for your peace of mind. 
• Flexible Payment Options: Jumbo reverse mortgage allows you to withdraw the loan amount in different forms. You can get a huge lump sum amount, a set line of credit, or in the form of monthly allowance. 
• Ownership of the House: With the jumbo reverse mortgage, you don’t lose ownership of the house. It remains yours, and you can live in it for as long as you want. 

Cons 

Some of the potential drawbacks of a jumbo reverse mortgage include the following: 

• High Interest Rates: Compared to HECM, proprietary reverse mortgages have higher interest rates. It can increase the overall cost of a loan over time. 
• Impact on Heirs and Resale: Like any other mortgage-based loan, the value of your estate is directly affected if the borrowers do not pay the loan. This also affects the inheritance you leave for your heirs. 
• Lack of Availability: Proprietary reverse mortgages are not available in all states. Each state regulates the lender’s fixed and adjustable rates, so they are not always available everywhere. 

Factors to Consider While Choosing Proprietary Reverse Mortgage Lender 

Choosing the right proprietary reverse mortgage lender is crucial. These are the important factors you need to consider when choosing a lender: 

• Lender’s Financial Background: Evaluate the lender's financial health and credit score before applying for a loan. A financially sound lender will not face difficulties that could affect your loan terms and services. 
• Customer Service and Support: Providing excellent customer service is essential for a smooth reverse mortgage loan transaction. Ensure that the lender has a responsive customer service team that is available to answer your concerns. 
• Interest Rates and Fees: Look for lenders offering competitive interest rates. Understand the difference between fixed and variable interest rates. Make sure to negotiate the service fees with the lender to make your transaction more cost-effective. 
• Loan Limits and Payment Options: Jumbo reverse mortgages offer high loan limits, which can vary from lender to lender. Based on the value of your home and financial requirements, determine the maximum amount you can borrow. 
• Application Process: Choose a lender that provides a smooth and transparent application process. Understand each lender's documentation and eligibility requirements. Choose a lender that keeps you informed about each step. 
• Customer Reviews: Reading online reviews of lender’s services is one of the most important parts of choosing the right lender. You can find testimonials on financial news platforms or review websites without a hassle. 

Choose a lender that provides you with all the proprietary reverse mortgage details before signing the deal with you. The lender you select can make or break your financial security plan after retirement, so choose wisely. 

Proprietary Reverse Mortgage Requirements 

A proprietary reverse mortgage is a loan plan designed only for senior citizens. You need to be 62 years old or older to qualify for this service. Since this is a private service, some lenders might have a higher or lower minimum age limit. Some lenders also offer loans to people 55 years old or older with a high-value house. 

You must also be the complete owner of your property to apply for this loan and live in the house to be eligible for it. If your house was on a mortgage, it needs to be paid off. Some lenders proceed with the application process if a small amount of mortgage is left. 

Other than that, the property should be the borrower’s primary residence. This means you need to live in the property for the majority of the year. Most lenders do not offer loans on secondary residences or investment properties. 

The eligible property types include: 

• Single-family homes
• Multi-family homes with up to four units (one unit must be occupied by the borrower)
• Condominiums that meet the lender’s requirements
• Some townhouses and manufactured homes that meet specific standards

However, make sure your property comes under the category of a high-value or luxury home to be eligible for a jumbo reverse mortgage. While there is no set property value, these loans are from homes with values that exceed the maximum HECM loan limits.

How to Compare Proprietary Reverse Mortgage Lenders 

The reverse mortgage loan market is quite competitive. You might find a list of trusted lenders in your area. But how do you select the right one for you? 

Here’s how: 

Shortlist Potential Lenders

Research and make a list of trusted lenders in your state. Consider the factors discussed above to shortlist the right lenders for you. Make sure they have a stable financial background and a good reputation. 

Once your list is ready, choose the three with the highest ratings and contact them to discuss further details. 

Consult with a Counselor 

Consult with a reverse mortgage counselor before applying for the loan. They will give you unbiased advice on different lenders.

These counselors are usually available through non-profit organizations or privately. With the help of a good counselor, you can make informed decisions while choosing a lender. 

Request Detailed Loan Estimates 

After choosing the lender, request detailed loan interest rates and fee estimates. The estimate should include elaborate details of interest rates, origination and servicing fees, closing costs, loan limits, and repayment terms.  

Negotiate Smartly 

Before starting the process, negotiate the terms and rates smartly. You can ask the lender to reduce the interest rates or the service fee. 

Do not hesitate to negotiate openly. This step can help you reduce a significant amount of money upfront. 

Read the Fine Print 

Lastly, read the loan documents carefully. Most people are trained to ignore the terms and conditions, but this can do more harm than good. Take some time to read the fine print to thoroughly understand what you are getting into. 

Understand the interest rates, the repayment mode and timeline, and the impact this loan will have on your heirs. 

Common Mistakes to Avoid 

Some of the most common reverse mortgage pitfalls you need to avoid include: 

• Overlooking Long-Term Impact: Understand that this loan may impact the value of your estate at the time of resale. It will also affect the amount of property your heirs will inherit. If the loan is not repaid in the borrower’s life, it will be repaid by selling the house after their passing. 
• Focusing on Interest Rates Only: If you only focus on the interest rates and not on the service fees, you might lose a lot of money upfront. Focus on the overall service fee and the terms of the loan agreement. 
• Ignoring Customer Care Quality: Poor customer service can cause misunderstandings and frustration in your experience. Make sure to read online reviews about the lender's customer service. 
• Misinterpreting the Loan Terms: Proprietary reverse mortgages can be complex, considering individual lenders' variable terms and conditions. Understand all the requirements before signing. If needed, seek clarification from the lender or a counselor. 

Conclusion 

A proprietary reverse mortgage is a retirement plan for people who own decent property. By considering all the factors, you can choose the right lender to secure your retirement. 

Consult with a reverse mortgage counselor or financial advisor before the process. This will help you make informed decisions about the security of your post-retirement finances. 

With the right vendor, proprietary reverse mortgages can be a valuable tool to enhance your retirement life. So, get in touch with Equity Access Group to find the best proprietary reverse mortgage lenders in your area!