Types of Reverse Mortgage Available

by Igor Buces

Reverse home mortgages aid seniors over 62 take advantage of the equity in their homes that has been created over the time they have been in the home. It can help seniors because it can be used as a type of second mortgage. In a reverse mortgage, the owner doesn’t ever need to pay back the loan for as long as the owner stays living in the house. It basically works as a loan on the present equity.

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 mortgage is offered by non-for-profit organizations and by say 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( fixes, improvements or property taxes.)

Federally Insured Reverse Mortgage

The US Department of Housing and Urban Development (HUD) backs this reverse home mortgage. This type of reverse mortgage is also known as a HECM (Home Equity Conversion Mortgage.) It’s a little more pricey than the single purpose reverse mortgage.

The biggest difference is that you can use the money for whatever reason you want. It is also an easier loan to qualify for and it’s available all over the country. This type of reverse mortgage is by far the most popular of the three.

Private Reverse Mortgage

Proprietary reverse mortgages are loans issue by private companies that haven’t been approved by the FHA. They have the same basic stipulations than HECMs.

Proprietary reverse mortgages can be very pricey. 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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