There are many different kinds of reverse mortgages, including ones with a single purpose, ones that are insured by the federal government, and ones that are made by private companies. When thinking about getting a reverse mortgage, you need to think about the pros and cons of each choice.
Reverse mortgages with only one purpose
A single purpose reverse mortgage costs the least to get, but, as the name suggests, it can only be used for one specific purpose. Most of the time, state or local government agencies offer them. People who need money for something specific, like paying property taxes or fixing up their homes, can use these loans to get the money they need. Here are some descriptions of the different types of reverse mortgages for a single purpose:
Property tax deferral mortgages, or PTD mortgages, are a type of reverse mortgage that gives you a loan advance to pay your property taxes.
Deferred payment loans, or DPLs, are reverse mortgages that give homeowners a lump sum to fix up or improve their homes.
Reverse mortgages backed by the government
The Federal Housing Administration will only cover a reverse mortgage that is insured by the federal government (FHA). One of the least expensive reverse mortgages that can be used for more than one thing is this one. Overall, they usually give the most cash out of all the options for reverse mortgages. The money from a reverse mortgage that is insured by the government can be used for anything. Home Equity Conversion Mortgages is another name for these loans (HECMs).
Reverse mortgages on private property
A reverse mortgage that is owned by a private company is called a proprietary reverse mortgage. These loans cost more than the other types of reverse mortgages, so you should be careful if you decide to get one. Anyone interested in these kinds of loans should compare them to a similar HECM. The higher home value limits for proprietary reverse mortgages are a good thing. So, if your home is worth a lot more than the average home in your county, you may get a bigger loan advance with a proprietary loan than with a Home Equity Conversion Mortgage (HECM).
As with any other financial decision, you should get help from a professional to figure out which option is best for you. Counselors who work with reverse mortgages can help you weigh all of your options and make an informed choice.
