Reverse Mortgages have been created for giving a steady income to retired senior citizens. By having a residential property, the house’s equity can be converted into cash without reimbursement until the home is sold.
Traditional Mortgage and Reverse Mortgage
Unlike a regular mortgage where you make monthly payments to the lender, you receive an amount from the lender in the case of reverse mortgage. Generally, this amount of money is not to be repaid as long as you are living in your house. Loan is recovered if the property is sold or the borrower passes away. It can help the homeowners bring some cash and meet the financial obligations while staying inside their homes.
Three Main Types
There are three types of loans that generally have low costs, namely, Single Purpose Reverse Mortgage, Home Equity Conversion Mortgages and Propriety.
Single Purpose Reverse Mortgage
These mortgages are granted to people with moderate incomes by the government. The purpose is to assist homeowners pay for necessary things that involve property and home, for instance, home repairs, home renovations, paying taxes and debts etc.
Home Equity Conversion Mortgage
HECM, also known as federally insured mortgage, is backed by Housing and Urban Development. These loans are usually more expensive than the Single Purpose loan. However, they do not require single purpose usage. You can meet a counselor and discuss in detail the risks, costs and alternative options for choosing this type of loan.
Proprietary
Proprietary loans are provided by the companies that create them. These loans are quite similar to Home Equity Conversion Mortgage. These loans are also more expensive than the Single Purpose Mortgage and they follow somewhat the same guidelines for qualifying the HECM. You do not necessarily have to meet a counselor for discussion unlike the Home Equity Conversion Mortgage.
Related posts: