Consider Different Reverse Mortgage Options
There are many different reverse mortgage options: single
purpose reverse mortgages, federally insured reverse mortgages,
and proprietary (private sector) reverse mortgages. Each option
has different pros and cons that need to be considered when
looking into taken out a reverse mortgage.
Single-Purpose Reverse Mortgages
A single purpose reverse mortgage is the lowest-cost type of
reverse mortgages to obtain, but as the name indicates it can
only be used for one specified purpose. They are typically
offered by state or local government agencies. These loans a
great for individuals who need cash for a specific purpose like
paying property taxes or fixing up there homes. Here are
descriptions for several different types of single purpose
reverse mortgages:
Property tax deferral (PTD) mortgages are reverse mortgages that
provide loan advances for paying property taxes.
Deferred payment loans (DPLs) are reverse mortgages providing
lump sum disbursements for repairing or improving homes.
Federally Insured Reverse Mortgages
A federally insured reverse mortgage is the only reverse
mortgage insured by the Federal Housing Administration (FHA).
These reverse mortgage are one of the lowest-cost multipurpose
reverse mortgages currently available. Overall they typically
provide the largest total cash benefits of all the reverse
mortgage options. The proceeds from a federally insured reverse
mortgage can be used for any purpose. These loans are also known
as Home Equity Conversion Mortgages (HECMs).
Proprietary Reverse Mortgages
A proprietary reverse mortgage is a mortgage product owned by a
private company. These type of loans are more expensive then the
other reverse mortgage types and should be approached with
caution. Anyone looking into these type loans should get a
comparison with a similiar HECM. One benefit of proprietary
reverse mortgages are the higher home value limits. So, if you
live in a home that is worth a lot more than the average home
value in your county, a proprietary loan may give you greater
loan advances than a Home Equity Conversion Mortgage (HECM).
As with any financial decision, you should get professional help
to help you decide which option is best for your situation.
Reverse mortgage counselors can help you evaluate each of your
options and help you make an informed decision.