What Are The Different Types Of Reverse Mortgages? Don’t Get Burned!
There are three types of reverse mortgages, single-purpose reverse mortgage, federally insured reverse mortgage, and proprietary reverse mortgages.
Types of Reverse Mortgages
A single-purpose reverse mortgage is the cheapest option. Its availability is limited, and it can only be used for one purpose, which is defined by the government, or the nonprofit lender. If the lender says that the loan must be used to pay home repair expenses or property taxes, then that is the way that the money from the loan must be spent. Most of the time, any homeowner with a low or moderate income can be qualified to take out this type of loan.
The Next Type
The next type is an HECM and proprietary reverse mortgage; these options are generally the least expensive. However, the upfront costs can be quite expensive. This factor is important to keep in mind, because if you borrow a small amount, or just need to borrow for a little while. HECM loans can be available to almost anyone, and can be used for any purpose.
Get A Loan
Before getting an HECM loan, there are certain requirements that must be met. The borrower must meet with a counselor. The government must approve this counselor. Sometimes lenders that offer proprietary mortgages require counseling. This counselor’s job is to explain implications, and offer alternatives to the HECM loan, like a government or nonprofit loan, or other types of reverse mortgages. These counselors will also assist in comparing costs of other types of reverse mortgages and help identify the effects of fees, other payment options, and other things that may affect the price of the loan. A counselor is legally not allowed to turn a person away if they cannot afford any of the counselor’s fees.
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