What is the most commonly used reverse mortgage?

A home equity conversion mortgage (HECM), the most common type of reverse mortgage, is a special type of mortgage loan only for homeowners age 62 and older. Home Equity Conversion Mortgages (HECM) are the most common reverse mortgage loans. These federally insured loans allow borrowers who meet age and home equity requirements to get money out of their homes; the higher the value of the property, the higher the payment. HECMs and reverse property mortgages can be more expensive than traditional home loans, and the initial costs can be high.

If you need a fixed amount for a specific repair or a tax bill, a single-purpose reverse mortgage is the cheapest option if you can find one. With a reverse mortgage, a homeowner who fully owns their home or who at least has significant capital to draw on can withdraw part of their capital without having to return it until they leave the house. Your home improvement costs include not only the price of the work being done, but also the costs and fees you'll pay to get the reverse mortgage. Interest on a reverse mortgage accrues every month, and yet you'll need to have adequate income to continue paying property taxes, property insurance and home maintenance.

And ask lots of questions to make sure that a reverse mortgage works for you and that you're looking for the right one for you. It's best to talk to a HUD-approved advisor before committing to a reverse mortgage (and if you want to get a HECM, you'll be asked to do so). Home Equity Conversion Mortgages (HECM) are the most popular type of reverse mortgage and the only one insured by the government, specifically by the United States. Since the purchase of the home and the purchase of a reverse mortgage are part of a single transaction, only one set of closing costs are paid.

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. If you decide to look for one, review the different types of reverse mortgages and compare before deciding on a particular company. If you're 62 or older and want money to pay your mortgage, supplement your income, or pay for health care expenses, you may consider applying for a reverse mortgage. Most reverse mortgages are home equity conversion (HECM) mortgages, which are federally insured and regulated by the United States.

Reverse mortgages are financial products that are designed to provide homeowners age 62 and older with a form of income using the equity in their homes. But remember, since your home is likely to have a high value (one of the reasons for opting for a reverse mortgage), you may also want to consider whether downsizing to something smaller would meet your goals and leave you with more capital. The home equity conversion mortgage, also known as HECM, tends to be the most popular type of reverse mortgage among homeowners.

Harry Lammel
Harry Lammel

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