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Reverse home mortgages aid seniors over 62 take advantage of the equity in their homes that has been created over the time they have been in the home. It can help seniors because it can be used as a type of second mortgage. In a reverse mortgage, the owner doesn’t ever need to pay back the loan for as long as the owner stays living in the house. It basically works as a loan on the present equity.
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.
Owners can apply for three different types of reverse home mortgages: single purpose reverse mortgage, federally insured reverse mortgage and private 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.
This type of reverse mortgage is by far the most common of the three. It accounts for over 90% of all reverse mortgages. It’s very popular because it’s very easy to apply to and qualify for. In addition, you can use the money from the loan far whatever reason you want.
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 drawback is its cost. Since it doesn’t need to comply with federal regulations, companies can get away with charging to much money to unsuspected senior citizens.
Tags: Business
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