Are reverse mortgages insured by the federal government? Can I get a reverse mortgage that is not insured by the government? Does insurance matter?
Not all reverse mortgages are insured by the Federal Government. The only reverse mortgages that are insured by the Federal Government are called Home Equity Conversion Mortgage or HECM. This type of insured reverse mortgage is only available through a FHA approved lender. To qualify for a HECM you must be at least 62 years of age and own your home either outright or have a very small mortgage balance. The home must be your main place of residence and you will be required to attend a HECM counseling session prior to applying for the loan.
Can I get a reverse mortgage that is not insured by the Federal Government?
You can obtain a reverse mortgage from a variety of banks or other private lending institutions that are not federally insured. Only FHA approved lenders are capable of processing a Home Equity Conversion Mortgage (HECM). Most of the reverse mortgages on the market are not insured mortgages.
Does insurance matter when looking for a reverse mortgage?
Having a mortgage that is insured is always a better situation for the consumer, but it is not necessary to complete the transaction. The benefit to having a FHA insured mortgage is the benefits it gives to your heirs. After you have passed away your home will be sold by the mortgage lender to recoup the money it has paid you. With a regular reverse mortgage the short fall of any balance owed by the sale of the house would fall onto the estate. With a federally insured reverse mortgage the FHA would pay the lender the balance die leaving the estate free and clear. This is paid from the premiums of the mortgage insurance collected by the FHA.
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