It's a common misconception that reverse mortgages are best used only as a last resort. While some other financial products are designed for a single purpose, the truth is that reverse mortgages aren't a “one-size-fits-all” loan. Over the years, these loans have evolved to offer a variety of options to fit the specific wants and needs of several borrowers aged 62 and over. If you are a senior homeowner interested in a government-insured loan or one who prefers a federally uninsured loan, a reverse home loan is available to you.
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 Then. Read on to learn more about the types of reverse mortgages currently available on the market. 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. Many older people have found this option useful when they want to buy a new home that is closer to family, smaller in size, or to adapt to new physical needs related to aging (such as houses with railings, ramps and wider entrances, all on the ground floor).
A great advantage of using this type of reverse mortgage is that a HECM to purchase 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've ever wondered about alternatives to government-backed inverted home loans, you'll be happy to discover that not all of these types of loans are federally insured. This type of reverse mortgage is offered by some non-profit organizations and some local and state government agencies, and is 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're looking for the most affordable option, you'll find it with single-purpose reverse mortgages. 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. Learn more about ways to improve your retirement. Enter your email address to subscribe. A reverse mortgage mortgage, unlike the HECM, is not backed by the government.
Since the federal government doesn't insure the loan, you'll have to go to a private company. Homeowners who opt for this type of reverse mortgage should prepare for significantly higher interest rates than if they were opting for a federally insured loan. The flip side is that a reverse mortgage attracts those with more expensive homes. The absence of regulations translates into higher loan amounts and, in turn, more funds when you need them most.
According to the FTC's consumer information page, you may qualify for additional funding if your home has a higher appraised value and has a small mortgage. Homeowners are limited to a one-time payment with their own reverse mortgage. But you won't have to worry about an insurance premium like you would with a home equity conversion mortgage. You may have difficulty finding an organization that offers a single-purpose reverse mortgage.
This type of loan is only available at nonprofit organizations and state and local government agencies. While homeowners are free to spend their funds on whatever they want with the two previous loans, there are rules and limitations with the single-purpose reverse 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. UU.
Department of Housing and Urban Development. Private 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. Inverted mortgages are financial products that have existed in the United States since a Maine-based bank published the first reverse mortgage in 1961.
You can use the reverse mortgage to pay off your original mortgage and use the remaining money to cover your living expenses each month. Some state and local governments and non-profit organizations also offer single-purpose reverse mortgage loans. It's the least expensive option for a reverse mortgage loan, in part because it's backed by the government and other non-profit organizations. It's impossible to go ahead with a single-purpose 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. These loans are sometimes referred to as “jumbo reverse mortgages” because borrowers may be eligible for more income than they would be with an FHA-insured HECM.
An HECM for Purchase is an FHA program that allows people age 62 and older to buy a new home with the income from a reverse mortgage loan. In addition, you can only receive a one-time payment on your own reverse mortgage, unlike several repayment options available with HECMs. If you find the idea of a reverse mortgage appealing, it's essential to understand exactly how the loan works and what is required of the property owner. .