Are reverse mortgages insured by the government? Are there any uninsured reverse mortgages on the market? What if I do not want reverse mortgage insurance?
The two most common types of reverse mortgages on the market today are either insured by the government through FHA or uninsured. A FHA insured reverse mortgage is also commonly known as a Home Equity Conversion Mortgage (HECM). You must go through a FHA reverse mortgage lender to obtain a federally insured reverse mortgage. Banks and other private lending institutions have the option of offering reverse mortgages that are not insured if the borrow so chooses.
Are there any uninsured reverse mortgages on the market?
There are several uninsured reverse mortgage programs available on the market today. The difference between the two types of mortgages is how the mortgage is handled once the home is sold. A federally insured mortgage will pay any remaining balance to the lender if the sale of the home falls short of the money owed. If the reverse mortgage is not insured, and the sale falls short of paying the balance off, the remaining amount falls to the estate for payment. Currently, if your home fails to sell for the amount that is owed, your children will need to pay any outstanding balance owed to the lender.
What if I do not want reverse mortgage insurance?
You are not required to have reverse mortgage insurance to use the reverse mortgage program. The FHA insurance is available, for a premium, to guarantee that any extra monies owed at the end of the contract are paid to the lender. This alleviates any responsibilities of the heirs to the estate. These insurance policies have been offered as a way to compensate for the recent fluctuations in the housing market. If your home sells for more than the amount owed the extra amount will go to your estate.
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