Reverse mortgages have evolved over the years, offering various options to cater to different financial needs. If you’re considering a reverse mortgage, it’s essential to understand the types available to make the best choice for your situation. In this blog, we’ll explore the different types of reverse mortgage programs available today.
1. Home Equity Conversion Mortgages (HECMs)
Home Equity Conversion Mortgages, or HECMs, are the most common type of reverse mortgage and are insured by the Federal Housing Administration (FHA). They offer flexibility in how you receive your funds, including lump-sum payments, monthly payments, or a line of credit. HECMs are available to seniors aged 62 and older and can be used for various purposes, from covering everyday expenses to home improvements.
2. Proprietary Reverse Mortgages
Proprietary reverse mortgages are private loans offered by financial institutions. These loans may have different eligibility requirements and terms than HECMs. They are often suitable for those with high home values who wish to access a more significant portion of their home’s equity.
3. Single-Purpose Reverse Mortgages
State or local government agencies or nonprofit organizations typically offer single-purpose reverse mortgages. These loans have specific purposes, such as covering home repairs or property taxes. They are an excellent choice for seniors who have limited financial needs related to their homes.
4. Fixed-Rate Reverse Mortgages
Fixed-rate reverse mortgages offer a stable interest rate throughout the loan’s duration. Thus, these can be a good choice if you want predictable monthly payments or if you prefer to receive a lump sum upfront.
5. Adjustable-Rate Reverse Mortgages
Adjustable-rate reverse mortgages, on the other hand, have interest rates that can change over time. While initial rates may be lower than fixed-rate options, they can fluctuate, potentially affecting the overall cost of the loan.
6. Home Equity Conversion Mortgage for Purchase (HECM for Purchase)
HECM for Purchase is a reverse mortgage program specifically designed for seniors looking to purchase a new primary residence. It allows you to use a reverse mortgage to buy a home, making it an attractive option for downsizing or relocating in retirement.
7. Jumbo Reverse Mortgages
Jumbo reverse mortgages resemble proprietary reverse mortgages but cater specifically to homes with exceptionally high values. These loans may allow you to access more substantial amounts of your home’s equity.
8. Deferred Payment Reverse Mortgages
Seniors who want to delay tapping into their home equity until a specific event occurs, such as a major expense or a change in circumstances, can opt for deferred payment reverse mortgages.