Reverse Mortgage Types And Benefits
Reverse mortgages are not of a one size fits all type. You need to look at all the available types to be sure you get the best reverse mortgage for you own situation at the least possible cost.
Single-purpose reverse mortgages are, as the name implies, designed for a particular purpose as specified by the nonprofit or government lender. This might be for property taxes, home improvements or repairs. In order to qualify for these loans you generally have to have low or moderate income and they are not available everywhere. But if you can qualify for one, you will enjoy the lowest possible loan costs.
HECMs and proprietary reverse mortgages have no income requirements and can be use for any purpose but are usually the most expensive. This may not be a problem if you intend your current home to be your final residence but if you plan on moving within a short time, this probably is not the way to go.
You are required to meet with a government approved hosing counselor before applying for a HECM. The counselor will explain all of the financial implications of the loan and point out alternatives to you. The counselors charge a fee for this service which is dependent upon your income, but will not be more than $125.00 (currently).
Several factors determine the amount of the money you can borrow through a HECM or proprietary reverse mortgage. These include including your age, the type of reverse mortgage you apply for, the FHA appraised value of your home, current interest rates and where you live. As a general rule, the more your home is worth, the less you currently owe on it and the older you are, the more money you can get through a reverse mortgage. The AARP has a free reverse mortgage loan calculator that is easy to use.
The HECM gives you options as to how you receive funds from a reverse mortgage. Options include a fixed monthly cash advance for a certain period or for as long as you stay in your home. You can also opt for a line of credit and then draw on this credit line as you choose. You may also select a combination of these methods.
HECMs will usually provide for a larger loan advance at a lower total cost when compared with proprietary loans. But higher-valued homes may provide the owner with a larger loan advances with a proprietary reverse mortgage.
There is only one way to find out which of the available reverse mortgage loan program is right for you. Shop and compare. And don’t be afraid to deal with a company you find online. We did and saved hundreds of dollars in costs.