Are you thinking about applying for a reverse mortgage? If so, you must know about the different types of reverse mortgage options. This is important so that you can select the best reverse mortgage option that is suited to your needs.
Types of Reverse Mortgages
1. Single Purpose Reverse Mortgages
The single purpose reverse mortgage is offered by certain local and state agencies as well as non-profit agencies. It is the least costly option as compared to others. The loans can be used only for a specific purpose that is identified by the lender. For instance, the lender may specify that the loan option be used for home improvements, home repairs, or paying property taxes. This option is suited for individual with moderate to low monthly incomes.
2. Proprietary Reverse Mortgages
The proprietary reverse mortgages, as the name implies, are backed by the company that offers them. The loan option allows you to get a large loan amount provided you own a high value house. So, if you have a small mortgage and own a house having a high appraised value, you should consider this loan option.
3. Home Equity Conversion Mortgages (HECM)
HECM loans are federally funded and insured reverse mortgages. They are backed by the US Department of Housing and Urban Development (HUD). There are no restrictions on the usage of the loan amount. Moreover, the loan eligibility criteria include being aged 62 or over and having a substantial equity on a home.
So, which is the best reverse mortgage option for you? The answer depends on your financial needs. If you own an expensive house, and want a high payment, then proprietary reverse mortgage option is the best for you. In case you want to obtain a small amount to pay for a particular expense, then you should opt for single purpose reverse mortgage. In other cases a HECM reverse mortgage loan is the best option.
