Types of Reverse Mortgages
The types of reverse mortgages primarily available are FHA insured HECM reverse mortgage loans, Single Purpose reverse home loans and Proprietary reverse mortgages.
However, since the collapse of the economy in late 2008, there are very few lenders offering Proprietary or Single Purpose loans at this time. The HECM reverse mortgage, which is insured by FHA, is the only choice available for most borrowers today. Regardless of which types of reverse mortgages you consider, it is advisable to thoroughly investigate all your options by getting a reverse mortgage quote.
Types of Reverse Mortgages from FHA
The HECM Standard reverse mortgage generally provides the largest loan advance of any of the FHA insured reverse mortgage loans. Home Equity Conversion Mortgages account for 90% of all types of reverse mortgages originated in the United States.
HECM loans are the only types of reverse mortgages insured by the federal government. They are insured by the Federal Housing Administration (FHA,) which is part of the U.S. Department of Housing and Urban Development (HUD.) The FHA insurance program is what guarantees you that the lenders will continue to pay you your loan proceeds and that your heirs will not be obligated to pay the lender if there is a shortfall at the time your loan has to be repaid.
In addition to the HECM Standard, HUD and FHA offer two other types of reverse mortgages. They are the HECM Saver and the HECM for Purchase. The HECM Saver reverse mortgage has lower costs associated with it, but also offers less money to borrowers. The HECM for Purchase can be used to buy a house using a reverse mortgage. A substantial down payment is required from the borrower(s) when using a HECM for Purchase.
HECM Reverse Mortgage Counseling
HECM reverse mortgage loans require borrowers to complete third party counseling, usually done by non-profit organizations, such as AARP before an application can be started. AARP in conjunction with HUD has implemented a counselor training program. As a result the counselors that are AARP certified are some of the best in the industry and are trained to use AARP software that compares total loan costs and provides a side by side comparison between various loan options available to applicants. AARP certified counselors can be contacted through the AARP network by calling their toll free number, 800-209-8085. The counseling can be done by telephone or in person at one of their offices.
Your HECM Reverse Mortgage Money
The money you receive from a HECM reverse mortgage can be used for any purpose. HECM loans are available in all 50 states, the District of Columbia, and Puerto Rico. Borrowers must be at least 62 years or older to be eligible for all types of reverse mortgages.
|You can receive your tax-free money from a HECM reverse mortgage in several ways:|
With a HECM reverse mortgage, if you choose a line of credit as one of your loan proceeds choices, the unused portion of your credit line will actually grow overtime, allowing your available funds to increase. The growth rate on your line of credit is equal to your loan’s effective interest rate. Reverse Mortgage Interest Rates Explained
HECM Loan Fees are standardized and capped by HUD to help protect seniors from being overcharged for services.