Types Of Reverse Home Mortgage: Their Advantages And Drawbacks
Saturday, June 7th, 2008 Subscribe To Our Feed
A reverse mortgage helps seniors over the age of 62 take advantage of the equity they’ve accumulated in their house to make up for the loss in income. They work as a type of loan advance on the present home mortgage.
Nevertheless, the homeowner of the home does not need to reimburse any of the money for as long the owner stays in the home.
The owner doesn’t have to pay any money back and can not be thrown out of the house for lack of payments because there aren’t any payments to make. The owner can choose to get the money from the %keyword1% in one of three manners: a one time payment, a credit line or as regular monthly payments.
There are basically three different kinds of reverse mortgages that homeowners can apply for: a single purpose %keyword1%, a federally insured %keyword1% or a proprietary issued %keyword1%.
Single Purpose reverse mortgage
A single purpose %keyword1% is offered by Government agencies and non-profit organizations. It’s the most inexpensive of the three kinds of %keyword1%.
The problem with this type is that they are more difficult to qualify for and the homeowner needs to have a small income. It also requires that the money from the %keyword1% is used for a particular purpose (improvements, repairs or property taxes.)
Federally Backed %keyword1%
The US Department of Housing and Urban Development (HUD) backs this %keyword%. This type of %keyword% is also known as a HECM (Home Equity Conversion Mortgage.) It’s a little more expensive than the single purpose %keyword1%.
The biggest difference is that you can use the money for whatever reason you choose. It is also an easier home loan to qualify for and it’s available all over the country. This type of %keyword% is by far the most popular of the three. It accounts for over 90% of all reverse mortgages in the market today.
Proprietary %keyword1%
A proprietary %keyword1% is a loan issued by a private lender that haven’t been approved by the FHA. They have the same basic requirements than HECMs.
A proprietary %keyword1% can be very expensive This is so because the private bank assumes all of the risks involved with the chance of loosing money on the home loan. Since they don’t go through the same type of control from the Federal Government, some private lenders offering this type of loan have been known to take advantage of seniors by charging exorbitant fees.
Generally, most people apply for the Federally insured %keyword1%. It’s fairly inexpensive and it is easy to obtain. In addition, when you apply for this type of reverse mortgage, you are entitled to a consulting session with a third party in which you can ask whatever questions you may have about how a %keyword% works and the consequences on your finances.
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