Real Estate - Get In The Know
Financing
Related Articles
- What Is A Mortgage
- Types of Financing
- Choosing A Loan
- What Determines Mortgage Rates
- Balloon Payment Mortgages
- Fixed or Variable Rate
- Interest Only Loans
- Avoid High Financing Costs
- Loan Pre-Qualification
- Down Payment With Gift Letter
- Down Payment From Savings
- Down Payment From 401K
- How Are Home Mortgage Rates Calculated Reverse Mortgages
- Tax Free Income For Seniors
- How Does A Reverse Mortgage Work
- Three Types of Reverse Mortgages
Three Types of Reverse Mortgages
Reverse mortgages can be complex. Because of the complexity, many seniors are being taken advantage of by lenders. That is why most reverse mortgage contracts require counseling.
The first type is the single purpose reverse mortgage. These are offered by some state and local government agencies and nonprofit organizations. They are not available in all areas. Call your county’s Department of Senior Services. Look in the white pages under your county listings for the phone number.
Single purpose means exactly that. The proceeds may be used for only the purpose specified by the lender and generally are only made to people with low or moderate incomes. If you call your county, be sure to ask if their reverse mortgage is a single purpose and what are the limits.
The second type of reverse mortgage is called a Home Equity Conversion Mortgage (HECM). The federal government insures these mortgages and they are backed by the Department of Housing and Urban Development (HUD). These loans can be used for any purpose. There are not income or medical restrictions. If you don’t plan on staying in your home for many more years, the fees associated with this type of loan may make it too high to consider.
HECMs also require all applicants to meet with a counselor from an independent government approved housing counseling agency. The housing counselors will explain all the options available to you, not just the reverse mortgage and help you decide which one is best. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area.
The third type is called a proprietary reverse mortgage. These are private loans backed by the companies offering them. In other words, they are NOT government insured. Like HECMs, the upfront cost could be high for a proprietary reverse mortgage. P