Three Types Of Reverse Mortgages

The type of reverse mortgage that will fit your needs depends a lot on your home's value and the loan amount you will need. Below is a comparison of the major players in the reverse mortgage lender marketplace. You should be able to quickly identify which option will work for you.

Each of the three reverse mortgage options below have the same basic requirements. The youngest borrower must be at least 62 years old. You must live in the house as your primary residence. You must own the home and have enough equity to qualify. You do not have to qualify with income, assets, or minimum credit as with a traditional mortgage.

Home Equity Conversion Mortgage (HECM)

• Insured by the Federal Housing Administration (FHA), a division of the U.S. Department Of Housing And Urban Development (HUD).
• Represents the vast majority of current reverse mortgage loan fundings.
• You do not contact the FHA or HUD to apply for a loan. You will be working with a professional reverse mortgage lender.
• The FHA limits mortgage loan amounts by the median home prices in a given geographic area (usually by county).
• The property must meet minimum guidelines according to HUD's published handbooks for real estate appraisers.
• Requires counseling by a HUD approved counselor.
• There are no limitations on how the money is used.
• Multiple payment options: Term payments are equal payments for a specific time period, Tenure payments are equal payments as long as you occupy the property, Line of Credit payments are unscheduled and at the borrower's discretion. Some combination of Term, Tenure and Line of Credit is also available.
• Must be 62 yrs old, occupy the property as a primary residence and own the home with sufficient equity.

Single Purpose Reverse Mortgages

• Offered by some state and local governments or non-profit agencies, these loans are not available to everyone, only seniors whose properties are within the area covered by the agency or organization offering the loan.
• Low interest rates and low costs
• Money is for a specific purpose such as home repair, home improvement, or to pay property taxes and cannot be used for any other reason that the reason specified
• Typically, this loan serves lower to moderate income borrowers. Strict income limitations may apply
• For more information on this option, contact the Area Agencies on Aging (AAAs) at 1-800-677-1116

Proprietary Products

• Reverse mortgage loan investors can make their own guidelines if they are not selling their loans back to Fannie Mae and if FHA insurance is not required. There are banks, credit unions, investment firms that have their own proprietary reverse mortgage loan product. If your needs cannot be met by an HECM or Homekeeper reverse mortgage, a proprietary product may be available.
• Homes with values greater than $500,000
• Credit lines that can be increased over time
• Jumbo loan amounts / Loan amounts greater than $417,000
• May allow for unique properties

The most notable difference between these three options is loan amount limits. The HECM loan amounts are restricted by the FHA and follow the median values published by the FHA by geographic area. The HECM loan amounts will be the smallest of the three. he proprietary products will be the largest loan amounts available. These reverse mortgage investors are non-governmental companies who make their own guidelines. The single purpose loan amounts are restricted to what is needed to accomplish the goal of home maintenance or property tax payment.