Types of Reverse Mortgage Available
Reverse mortgages help senior citizens over the age of 62 take advantage of the equity they have accumulated in their home to make up for the loss in income. They work as a kind of loan advance on the present mortgage. However, the owner of the home doesn’t need to pay back any of the money for as long the owner stays in the home.
The homeowner can never be thrown out of the home for lack of payment since there is no money to pay back. It is a good type of loan for seniors with a decreasing income but who would like to stay in the homes they have had for a long time The owner can choose to access the money in one of three ways: a credit line, a one-time payment or a regular monthly payment.
There are basically three different types of reverse mortgages that owners can apply for: a single purpose reverse home mortgage, a federally backed reverse mortgage or a privately issued reverse mortgage.
Single Purpose Reverse Home Loan
This type of reverse mortgages is offered by some Government organizations and non-profit agencies. It’s the cheapest of the reverse mortgage available. However, there are more hurdles to go over to qualify for this loan. The owner must be in the lower income bracket and the home loan must be used for a specific pre-approved purpose (home improvements, repairs or to pay real estate taxes.)
Federally Backed Reverse Mortgage
The HUD (U.S. Department of Housing and Urban Development) insures this reverse mortgage. This kind of reverse mortgage is also known as a Home Equity Conversion Mortgage (HECM.) It is a loan slightly more expensive than the single purpose one.
The biggest plus of this loan is that you can use the proceeds from it for any purpose you want. It is also easier to get and it’s available to homeowners all over the country. This kind of reverse home loan is by far the most common.
Proprietary Reverse Mortgage
This type of mortgage is provided by a private company who hasn’t been approved to issue a Federally Insured Reverse Mortgage. In general, they have the same type of requirements than a regular reverse mortgage.
Proprietary reverse mortgages can be very expensive. Since they don’t go through the same kind of control from the Federal Government, some private companies offering this type of loan have been know to take advantage of senior citizens by charging exorbitant fees.
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