It's a common misconception that reverse mortgages are only used as a last resort. In reality, these loans have evolved to offer a variety of options to fit the specific wants and needs of several borrowers aged 62 and over. Whether you're looking for a government-insured loan or one that is federally uninsured, there is a reverse home loan available to you. The HECM for Purchase is a product designed to help senior homeowners purchase a new home that better meets their needs, while obtaining a reverse mortgage in the same transaction.
This type of loan only incurs one set of closing costs, rather than two sets of closing costs that occur if a borrower buys a home and then separately applies for a reverse mortgage on it. If you're looking for alternatives to government-backed inverted home loans, you'll be happy to discover that not all of these types of loans are federally insured. Single-purpose reverse mortgages are offered by some non-profit organizations and some local and state government agencies, and are intended to be used for a specific, approved purpose, such as repairing the home or paying property taxes. Usually, only a small amount of capital is used, reducing the cost of this type. If you want to access a portion of your equity with a loan that fits your high-value home, allows you to refinance your existing reverse mortgage, or that combines a reverse mortgage and the purchase of a new home in a single transaction, you're likely to find a counterpart in one of the invested mortgage loans described above.
To find single-purpose reverse mortgage lenders, research local aging agencies that should be able to tell you if there are home repair loan programs in your local area. If you've decided that a reverse mortgage is the right choice for you, it's helpful to know that you're in no way limited to just one type of loan. You have different options for obtaining the type of loan that best suits your needs. For help determining which type would benefit you most, call American Advisors Group at 1-888-998-3147 and speak to one of our experienced investment mortgage professionals.
Types of Reverse Mortgages
HECM (Home Equity Conversion Mortgage)HECM (pronounced HEKUM) is the most commonly used acronym for a Home Equity Conversion Mortgage, a reverse mortgage created and regulated by the U. S.
Department of Housing and Urban Development. This type of loan is backed by the government and offers borrowers access to their equity with lower interest rates than other types.
Private Label Reverse MortgagesPrivate label reverse mortgages are privately insured by the mortgage companies that offer them. They are not subject to the same regulations as HECMs, but as a standard best practice, most companies that offer private label reverse mortgages emulate the same consumer protections found in the HECM program, including mandatory counseling.
Single-Purpose Reverse MortgagesSingle-purpose reverse mortgages are offered by some non-profit organizations and some local and state government agencies.
These loans are intended to be used for specific purposes such as repairing the home or paying property taxes. Homeowners are limited to a one-time payment with their own reverse mortgage.
ConclusionIt's impossible to go ahead with any type of reverse mortgage without prior approval from a lender. If you're interested in a reverse mortgage loan, you should compare the loan options, fees, and interest rates from various lenders to ensure that you'll get the features of the loan you want and the lowest possible interest rate.
If you leave home to enter a nursing home or other long-term care facility and are absent for more than a year, the reversed loan generally must be repaid. Compare interest rates and fees from several proprietary reverse mortgage lenders and gather quotes from several HECM providers to see which option offers you the best deal. If you need help determining which type would benefit you most, call American Advisors Group at 1-888-998-3147 and speak to one of our experienced investment mortgage professionals.