Types of Reverse Mortgages

Reverse mortgages can be a very good source of financial support for the elderly during their retirement years. However, there are a number of different types of reverse mortgages. Senior’s 62 and over, with adequate equity are eligible for a reverse mortgage. Your house does not necessarily have to be fully paid in order for you to take a reverse mortgage. The mortgage would be paid off at the time of closing and any remaining cash from the reverse mortgage belongs to the homeowner. The homeowner does not give up their house title. A reverse mortgage simply gives you some tax free cash from a portion of the existing home equity.
How it works
The borrower will be required to pay some closing costs and fees just like in any other type of loan. Most of these fees are paid from the new mortgage at closing. Payment of property taxes and insurance becomes the sole responsibility of the borrower. Because no monthly mortgage payment is required on a reverse mortgage, the accumulated interest on this loan becomes due once you move, pass on or sell your house. This debt is not passed on to the heirs nor does it affect other assets. Any remaining equity belongs to the heirs.
Below are the three most popular types of reverse mortgage

  1. Single purpose (Not available in Hawaii)

This is usually offered by state, local and nonprofit organizations. This type is the least expensive as compared to the other types. This type is used only for the stated specific purposes such as property taxes or home repairs. The main purpose for single-purpose reverse mortgage is to pay a “required” expense that the homeowner has no other way to pay.

  1. Home equity conversion mortgage (HECM)

This is the most common and popular reverse mortgage and is federally insured (FHA). They can be used for any purpose since they have no medical requirements, and have minimum income and credit qualifications. A session with a HUD approved counselor is required before you are approved for this type of mortgage. There are no counselors in Hawaii so the homeowner is provide an 800 number for the session. The counselor will point out the pros and cons of a reverse mortgage, and assist the homeowner in seeing if there are other options..

  1. Proprietary or Jumbo

This type is only available to homes that appraise at a higher value. It is available only through private companies which lend you this loan when you require it. They make up a very small percentage of the market. They are not federally regulated or insured. They usually have much higher interest rates and other restrictions.
A reverse mortgage is not for everyone. It is always recommended to consult with your family, a financial advisor or a reverse mortgage specialist.
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 2 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 are eligible for.

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