Types of Reverse Mortgage Available
Seniors over 62 can take advantage of the equity they have build in their home by applying for a reverse mortgage. A reverse home loan can help seniors because it works as a loan advance. With this type of loan, the owner doesn’t need to make monthly payments back to the bank and doesn’t need to pay back any of the money for as long as the owner lives in the property.
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.
Owners can apply for three different types of reverse home mortgages: single purpose reverse mortgage, federally insured reverse mortgage and private reverse mortgage.
Single Purpose Reverse Home Mortgage
This type of mortgage is offered by non-for-profit organizations and by state and federal Government agencies. It’s the cheapest reverse mortgage to obtain. The biggest problem is that it’s harder to qualify for this loan since you must be in the lower income bracket and complete a longer application. In addition, the funds from the loan can only be used for a specific reason( repairs, improvements or property taxes.)
Federally Insured 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.
This type of reverse mortgage is by far the most common of the three. It accounts for over 90% of all reverse mortgages. It’s very popular because it’s very easy to apply to and qualify for. In addition, you can use the money from the loan far whatever reason you want.
Proprietary Reverse Home Mortgage
This kind of reverse home loan is available through private companies that haven’t been HUD certified. They usually have the same requirements than a federally insured one.
The biggest problem with this type of loan is that it can be very expensive. Since private companies offering this type of loan do not need to comply with federal regulations, some companies take advantage of it by charging excessive fees to unsuspected seniors.
