Consider Different Reverse Mortgage Options
by: Charles Kirkendall
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.
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