Reverse Mortgage Info for Seniors
Reverse mortgages can be helpful for seniors who fully understand how the process works and any downfalls that may be involved. You must take the time to educate yourself and your spouse about the options and how the loan works. This can be a complicated process and counseling is required to be sure to make the best choice for you and your family.
What is a Reverse Mortgage?
It is basically a loan. Homeowners 62 plus that have a good amount of equity in there home can borrow against that value. You will receive the value one lump sum with a monthly payment or a line of credit. Different from a forward mortgage - a reverse mortgage does not require you to make any loan payments. Rather, when you pass away, sell or move permanently the loan is due. There are federal regulations to ensure the loan structure doesn't exceed the value of the home.
There are 3 Types of Reverse Mortgages:
- Single-Purpose Reverse Mortgage
This type of Reverse Mortgage is offered by state and local agencies as well as nonprofits. This would be the most economical process for a reverse mortgage. This option is ONLY to pay for specific approved things, such as property tax or home repairs.
- Home Equity Conversion Mortgage
HECM's are backed by the United States Dept of Housing and Urban Development and are federally-insured. This option is more costly and has some additional upfront costs. This type of loan can be used for anything. There are no restrictions, income limits or medical requirements. You are required to have counseling sessions to be fully aware and prepared for this type of loan.
- Proprietary Reverse Mortgage
If you have a higher valued home, this loan provides a large advance. This loan is not federally insured. You will likely be able to borrow more but through counseling you can decide if this is the best type of reserve mortgage for you.