Single-purpose reverse mortgages are offered by some states and local government agencies and nonprofit organizations. Single-purpose reverse mortgages are the least expensive option available. They can only be used for one purpose, which will be determined, by the government or nonprofit lenders such as for home repairs or improvements.
Proprietary reverse mortgages, which are private loans that are backed by the companies that develop them. These are more expensive and have high upfront costs.
Home Equity Conversion Mortgage (HECM)
HECM is an FHA reverse mortgage program. According to the U.S Department of Housing and Urban Development, a reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you.
You are able to withdraw some of the equity in your home.
Many of our senior citizens use this equity to supplement their social security, foot medical bills and make home improvements. FHA offers eligibility for this HECM program is for persons older than 62 who:
They own their home.
Have a mortgage balance that is low.
A mortgage balance that should be able to pay off closing costs with proceeds from the reverse loan.
They must possess financial resources that can cover ongoing property charges including taxes and insurance.
They must live in the home.
The great thing about the HECM program is you can still apply for it even if you didn’t buy your home with an FHA insured loan.
With the FHA HECM, you must have a single family home or a 2-4-unit home with one unit occupied by the borrower. Also, HUD-approved condominiums and manufactured homes that meet FHA requirements are also eligible.
A REVERSE MORTGAGE & A HOME EQUITY LOAN, WHAT’S THE DIFFERENCE
With a home equity line of credit, you must make payments monthly on both the principal and interest. ON the contrary, a reverse mortgage pays you, and there are no monthly principal and interest payments. You will be required to pay real estate taxes, utilities, and hazard and flood insurance premiums.
HOW MUCH MONEY CAN YOU RECEIVE FROM YOUR HOME?
Some factors like your age, the interest rate on the mortgage, According to the HECM there is an FHA mortgage limit of $625,500. Or the initial mortgage insurance premium or sales price.
HOW TO RECEIVE PAYMENTS
Tenure – equal monthly payments so far as one borrower still lives in the home and property must be their main place of stay.
Term – equal monthly payments for a fixed period of months selected.
Line of Credit- unscheduled payments or in installments.
Modified Tenure – receiving both line of credit and scheduled payments monthly as long as you still live in the home.
Modified Term – you will have the line of credit and monthly payments for a period of months.
With reverse mortgages, you can cancel within three business days for any reason without penalty.