California

Save Money on Lenders Margin

The margin is the amount that lenders or loan originators add to the base interest of your loan. The base rate is set by the government. The margin cap generally ranges from 1.5 and 5 percent. Each type of reverse mortgage loan is capped differently; your total interest rate will be a combination of the base rate plus the margin rate.

As you can guess, this is another opportunity to comparison shop for your interest rate. This will vary from lender to lender. This is similar to a regular mortgage. You can shop for the loan and interest rate that is best for your situation.

Margin limits are a way to protect seniors from greedy and unethical loan originators. Dictating a rate range prevents excessively high rates from being charged to loan applicants. The higher the margin rate the less cash you’ll receive from your reverse mortgage loan. A lower margin equates to more cash in your pocket.

The margin rate doesn’t affect your payment amount but it does affect the amount you can borrow in the first place.

Here is one example of how shopping for a lower margin rate can mean more money for you. This example is based on a $200,000 home.
The originator is the person who gets the ball rolling in your quest to acquire a reverse mortgage. When you first meet with them, they will verify that the type of reverse mortgage loan you’ve chosen with your advisor is truly the best fit for your situation. They’ll help you to complete your application. Once the application is completed the originator will handle submitting it to the underwriter and the lender.

You’ll work closely with the originator during the course of your loan application process. For this reason, make sure you chose someone you feel comfortable with.

For their assistance, originators charge a fee. The origination fees will be part of your closing costs. This is yet another opportunity to save big money. Find an originator with experience, a person you feel comfortable with, and a person that charges competitive rates.

Below are examples of the kind of savings you may find when you shop around for good rates on originator fees.