The Most Common Types of Reverse Mortgages

by: IgorBuces
Total views: 24 | Word Count: 381

Reverse mortgages help senior citizens over the age of 62 take advantage of the equity they have accumulated in their home to make up for the loss in income. They work as a kind of loan advance on the present mortgage. However, the owner of the home doesn't need to pay back any of the money for as long the owner stays in the home.

In the US, the owner of the home never needs to repay the mortgage and can not be thrown out of the house because lack of payments since there are not any. The owner can receive the money as a one time payment, monthly payments or as a credit line.

As a senior citizen, you can choose among one of three types of reverse home mortgages: a single purpose reverse home loan, a federally backed reverse home mortgage or a privately issued reverse mortgage.

Single Purpose Reverse Home Mortgage

A single purpose reverse mortgage is offered by Government agencies and non-profit organizations. It's the most inexpensive of the three types of reverse mortgages. The problem with this type is that they are harder to qualify for and the owner must have a small income. It also requires that the funds from the loan are used for a specific purpose (improvements, repairs or property taxes.)

Federally Insured Reverse Home Mortgage

The US Department of Housing and Urban Development (HUD) backs this reverse home mortgage. This type of reverse mortgage is also known as a HECM (Home Equity Conversion Mortgage.) It's a little more expensive than the single purpose reverse mortgage.

The biggest difference is that you can use the money for whatever reason you want. It is also an easier loan to qualify for and it's available all over the country. This type of reverse mortgage is by far the most popular of the three.

Proprietary Reverse Mortgage

This type of mortgage is provided by a private company who hasn't been approved to issue a Federally Insured Reverse Mortgage. In general, they have the same type of requirements than a regular reverse mortgage.

The biggest problem with this type of loan is that it can be very expensive. Since private companies offering this type of loan do not need to comply with federal regulations, some companies take advantage of it by charging excessive fees to unsuspected seniors.

About the Author

To learn additional information about how a senior reverse mortgage works, go to our site. In it you'll learn professional counsel on anything having to do with a reverse mortgage