Popular types of reverse mortgage

A Reverse mortgage can be a very good source of financial support for the elderly during their retirement. However, some people do not know there are different types of reverse mortgages. Senior citizens should know that they are eligible for reverse mortgage when they are at least 62 years old and have some equity…even if your spouse is younger. The amount of the equity available depends on the value of your home, the amount of mortgage (if any) owed and the age of the youngest borrower. Your house does not necessarily have to be fully paid in order for you to qualify for a reverse mortgage. The homeowners do not have to give up their house title. To a senior homeowner, a reverse mortgage simply gives you some tax free cash from your existing home equity.

How it works

The borrower may be required to pay some closing costs and fees just like in any other type of loan. As with a forward or conventional loan, payment of property taxes, insurance and upkeep are required of the homeowner. The only difference is that in a forward mortgage, the insurance and taxes may be included with your monthly payment. With a reverse mortgage, because no monthly payment is required, the homeowner must remember to pay their insurance and taxes when they become due. Accumulated interest on this loan becomes due once you move or sell the house. When the last remaining borrowers sells the home or passes away, the lender is repaid when the home is sold. Any remaining equity belongs to the heirs. This debt is not passed on to the heirs nor does it affect other assets.
Below are the three most popular types of reverse mortgage

  1. Single purpose
    This is usually offered by state, local and nonprofit organizations. It is the least expensive as compared to the other types. This type of reverse mortgage is used only for the stated specific purposes such as property taxes or home repairs. The purpose of this loan is usually determined by your lender and is also regulated. This loan is not available in Hawaii.
  2. Home equity conversion mortgage
    These are the most common and most popular reverse mortgages. They are federally insured and regulated, and have upfront costs most of which are built into the loan. There are some out-of-pocket upfront costs, such as the counseling, the appraisal, the credit report and the flood certification. This loan can be used for any purpose and have no minimal credit and income requirements, and no medical restrictions. A counseling session is required and is very important before you are approved for this type of mortgage. The counseling session will provide you with the pros and cons of this type of loan and encourage you to look at other options, such as selling and moving into a smaller home. For you to qualify for this type of loan, one has to meet requirements set by the HUD.
  3. Proprietary
    This type is only available to homes that appraise at a high value. As a borrower, if you owe less on your home you get more cash. It is available through private companies and does not have the same regulations and protections as other types. This type of mortgage is at times called a jumbo reverse mortgage.

A reverse mortgage is not for everyone. It is always recommended to consult with your family, a financial advisor or a reverse mortgage specialist before proceeding.

To find out how much you qualify for, and whether a reverse mortgage is right for you, consult the author of this article to discuss the pros and cons. For more information you can also visit: www.AlohaMortgageSolutions.com. There you will find two short video’s, one title “Reverse Mortgages Explained;” and the other, “Testimonials of Real Hawaii Clients.”

For a FREE, no-obligation quote, contact Daniel Nicolosi at Harbor Financial Group – Your Aloha Mortgage Solution in Honolulu. You can reach him directly at (808) 799-8218 on Oahu; or Toll Free at 888-423-2468 from the Neighbor Islands. Within 10 minutes he can tell you how much you are eligible for.


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