Understanding the Many Types of Reverse Mortgages
There are multiple types of reverse mortgages that are suited to different types of borrowers.
Contrary to what you may have heard, reverse mortgages are not a last-resort source of financing. All the types of reverse mortgages are carefully regulated by the Federal government to protect the rights and financial interests of seniors.
There are five main types of reverse mortgages that are suited to different kinds of borrowers. These types of reverse mortgages include:
- Standard Home Equity Conversion Mortgages (HECM)
- HECM for Purchase
- Reverse Mortgage Refinance
- Single-Purpose Reverse Mortgages
- Proprietary Reverse mortgages
For details on how these different types of reverse mortgages work, keep reading.
For more details on the different types of reverse mortgages and reverse mortgage requirements from a US-based representative and to learn which type might be right for you, call one of our helpful reverse mortgage experts at Citizens Lending Group at (800) 480-6828 or use our convenient online contact form.
Standard Home Equity Conversion Mortgages (HECM)
This is the most popular among the different types of reverse mortgages. A HECM is a federally-insured reverse mortgage backed by the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). Borrowers above 62 years old can access a loan of up to $625,500 matched to the home equity possessed by the borrower and the value of the property. This can be either a variable rate or a fixed rate loan.
HECM for Purchase
This is among the most popular types of reverse mortgages for seniors looking to "downsize" to a more manageable property while eliminating mortgage payments. This is similar to an ordinary HECM, but the proceeds of the loan are used to purchase a new property. Unlike conventional financing, the homeowner only needs to pay closing costs once.
Reverse Mortgage Refinance
These types of reverse mortgages were primarily designed for homeowners above 62 years old who already have a reverse mortgage but want to take advantage of lower interest rates or who want to take advantage of an increase in the value of the home equity since the time when the reverse mortgage was initially taken out. It can also be used to add a new co-owner to the home such as a spouse.
Single-Purpose Reverse Mortgages
Among the different types of reverse mortgages, this "jumbo" reverse mortgage was designed for seniors who possess homes that exceed the $625,500 limit of conventional reverse mortgages.
These differ from other types of reverse mortgages in that they are not insured any Federal institution but by an independent company. It also differs from other types of reverse mortgages in that the funds are only available in a lump sum when the loan closes. Interest rates are usually higher than other types (because they are not insured), but there are no insurance premiums to pay and the fees associated with it are relatively lower.
Learn More About the Types of Reverse Mortgages
If you need help weighing the pros and cons of the different types of reverse mortgages, a friendly representative from Citizens Lending Group is here to guide you. Call us at (800) 480-6828 or use our convenient online contact form to learn more about the reverse mortgage requirements and if a reverse mortgage is right for you.