Seniors over 62 can take advantage of the equity they have build in their home by applying for a reverse mortgage. A reverse home loan can help seniors because it works as a loan advance. With this type of loan, the owner doesn’t need to make monthly payments back to the bank and doesn’t need to pay back any of the money for as long as the owner lives in the property.
The homeowner doesn’t need to pay any money back and can not be kicked out of the home for lack of payments because there aren’t any payments to make. The homeowner can elect to receive the money from the reverse mortgage in one of three ways: a one time payment, a credit line or as regular monthly payments.
As a senior citizen, you can choose among one of three types of reverse home mortgages: a single purpose reverse home loan, a federally backed reverse home mortgage or a privately issued reverse mortgage.
Single Purpose Reverse Mortgage
A single purpose reverse mortgage is offered by Government agencies and non-profit organizations. It’s the most inexpensive of the three types of reverse mortgages. The problem with this type is that they are harder to qualify for and the owner must have a small income. It also requires that the funds from the loan are used for a specific purpose (improvements, repairs or property taxes.)
Federally Insured Reverse Mortgage
The HUD (U.S. Department of Housing and Urban Development) insures this reverse mortgage. This kind of reverse mortgage is also known as a Home Equity Conversion Mortgage (HECM.) It is a loan slightly more expensive than the single purpose one.
The biggest difference is that you can use the money for whatever reason you want. It is also an easier loan to qualify for and it’s available all over the country. This type of reverse mortgage is by far the most popular of the three.
Proprietary Reverse Mortgage
This type of mortgage is provided by a private company who hasn’t been approved to issue a Federally Insured Reverse Mortgage. In general, they have the same type of requirements than a regular reverse mortgage.
Proprietary reverse mortgages can be very expensive. Since they don’t go through the same kind of control from the Federal Government, some private companies offering this type of loan have been know to take advantage of senior citizens by charging exorbitant fees.
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