Reverse Mortgage Loan Blog

A reverse mortgage is exactly what its name suggests – a mortgage in reverse. Instead of you paying money to a lender in exchange for the money they paid up front for your home, a lender pays you money in exchange for the money in your home that will become available upon your death, or when you sell the home.

Reverse mortgages are available to anyone 62 years of age or older. There are three types of reverse mortgages according to the Federal Trade Commission.

Single-purpose reverse mortgages

These are offered by some state and local government agencies and nonprofit organizations.

According to the Federal Trade Commission, single-purpose reverse mortgages are the least expensive type of reverse mortgage, but they do come with strings attached. Because they are offered by state and local governments as well as nonprofit organizations, they are not available everywhere and can only be used for one purpose specified by the nonprofit or government entity. For example, the lender might restrict the money from the reverse mortgage so that is can only be used for property taxes, or home repairs, not vacations or a new car. These types of reverse mortgages can be obtained by most homeowners with low or mid-range income levels.

Federally-insured reverse mortgages

These are known as Home Equity Conversion Mortgages (HECMs). They are backed by the U. S. Department of Housing and Urban Development.

According to the Federal Trade Commission, Home Equity Conversion Mortgages (HECMs) are more expensive than traditional home loans, but they do offer distinct advantages. First of all, they are backed by the U.S. Department of Housing and Urban Development (HUD). Also, HECM loans are offered in a wide variety of places unlike single-purpose reverse mortgages, they do not have income or medical requirements, and the money from them has no strings attached – it can be used for anything, also unlike a single-purpose reverse mortgage.

In addition, according to the Federal Trade Commission, the amount of money you can borrow from a lender with a HECM depends on several factors. The older you are, the unique type of reverse mortgage you select, the value of your home determined by an appraiser, and the current interest rates are determine the amount you can borrow from a lender. Generally, the older you are, the more equity you have and the less you owe on your home, the more money you can get from a HECM.

Proprietary reverse mortgages

These reverse mortgages are not connected to the government. In fact, they are private loans that are supported solely by the companies that develop them.

Proprietary reverse mortgages are the most expensive type of reverse mortgage, so they appeal to people with high valued homes appraised at values greater than the limits of a HECM (more than $400 to $500,000 according to www.newretirement.com). They are also referred to as jumbo reverse mortgages.

Unlike HECMs, the loans created by jumbo reverse mortgages were created by financial institutions, not the government. Like a HECM, jumbo reverse mortgages are widely available, have no requirements in terms of health or income, and the money from them has no restrictions so you can use it for anything you would like.

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