Types of Reverse Mortgage
There are
three types of reverse mortgages
for qualified borrowers.
- FHA Home Equity Conversion
Mortgage or "HECM"
- Fannie Mae "Home
Keeper" Mortgage
- Proprietary Reverse Mortgage
Products
FHA
Home Equity Conversion
Mortgage or "HECM"
This type of loan is insured by the FHA (Federal
Housing Administration), a division of the US Department of Housing and
Urban Development (HUD).
The loan amount is based upon your age and the value
of the home. HUD regulates the amount of each individual loan, as well as
limiting the maximum amounts allowed according to the area of the country.
This type of reverse mortgage limits the loan costs. The government
guarantees that the lender meets its' obligations.
Many consumers choose the HECM loan because of the
credit line growth option. The rate at which the credit line grows is equal
to the current interest rate being charged on the loan plus 0.5%.
Unlike other reverse mortgages with the same costs,
the cash received from a HECM loan can be used for any purpose.
HECM loans also usually provide the largest loan cash advances compared to
other reverse mortgage programs
Cash can be advanced to you in three ways:
- a single lump sum of cash.
- a line of credit for a specific amount from which
you decide when and how much to withdraw. The line of credit grows
over time.
- as a monthly payment made to you over a specified
amount of time or as long as you live in the home.
Borrowers can select from one or all of these options,
and can change their selection at any time during the loan period, providing
further flexibility to the HECM loan.
HECM loans account for the majority of reverse
mortgages originated.
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Fannie Mae "Home
Keeper" Mortgage
This type of reverse loan is guaranteed by Fannie Mae,
it is not insured by the FHA.
Cash can be advanced to you in three ways:
- a single lump sum of cash
- a line of credit for a specific amount from which
you decide when and and how much to withdraw. The line of credit does NOT
grow.
- as a monthly payment made to you over a specified
amount of time or as long as you live in the home.
Borrowers can select from one or all of these options,
and can change their selection at any time during the loan period.
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Proprietary Reverse
Mortgage Products
These loans are not insured by the FHA, they are
guaranteed by the company from which they are issued.
Cash can be advanced to you in three ways:
- a single lump sum of cash
- a line of credit for a specific amount from which
you decide when and and how much to withdraw. The line of credit does NOT
grow.
- as a monthly payment made to you over a specified
amount of time or as long as you live in the home.
The main advantage of this type of product is that
there are no limits to the amount of the cash advanced, in some cases going
over $1,000,000 when the value of the home is sufficient. Also they can have
no closing costs.
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