Reverse mortgages can be extremely confusing, which often leads people to think, "I wish someone would just tell me about a reverse mortgage instead of having to sort through all of the confusing information myself." If you feel that way, we understand. With so many different types of reverse mortgages, it can be hard to keep them straight. To help you better understand reverse mortgages, we've put together information on the different types of reverse mortgages. For every part of a reverse mortgage you wish someone would tell you about, we've got you covered.
Tell Me About Reverse Mortgage Disbursements If you are looking for a reverse mortgage, probably the most important part for you is how will you get the money. There are four different ways that money can be disbursed under a reverse mortgage:
- In a large lump sum
- Through monthly cash advances
- Through a credit line
- A combination of the above three ways ("A New Kind of Loan in Reverse")
When you get a monthly cash advance, you can get it for either a specific number of years or for the entire time you live in the house ("Frequently Asked Questions"). The amount you receive will depend on which type of monthly cash advance you choose.
When you get a credit line, you can get either a flat or a growing one. A flat credit line means that the amount you are able to withdraw never changes ("Frequently Asked Questions"). Therefore, if you have a $100,000 flat credit line and withdraw $40,000, then you will only have $60,000 still available. Whereas, when you get a growing credit line, the amount you can borrow increases by a certain percentage ("Frequently Asked Questions"). Let's say your growing credit line increases by 10% each year. Right now, you have a total amount of credit equal to $60,000. You decide to take out $20,000, leaving you with $40,000 in available credit. Over that next year, that $40,000 will grow by 10% leaving you with $44,000 in available credit.
When you decide which type of payments you want for your reverse mortgage, think about how you plan on using your money. Make sure the payment method you choose will fit your lifestyle.
Tell Me About Government Reverse Mortgages There are two different types of government reverse mortgages: single-purpose reverse mortgages and Home Equity Conversion Mortgages (HECMs). Single-purpose reverse mortgages, which are provided by non-profit organizations and state and local government agencies, can only be used for one reason that is approved by the agency that gives you the loan ("Reverse Mortgages: Get the Facts Before Cashing In On Your Home's Equity"). For example, you may be able to receive a single-purpose reverse mortgage for remodeling your bathroom or paying certain types of taxes or bills. Single-purpose reverse mortgages are not available everywhere and are only given to those with low or moderate incomes; however, if you can find one, they often have low costs which is a big plus ("Reverse Mortgages: Get the Facts Before Cashing In On Your Home's Equity").
HECMs are federally insured private loans that are backed by the U.S. Department of Housing and Urban Development ("Top Ten Things to Know if You're Interested in a Reverse Mortgage"). To qualify you must be 62 years old or older, own your home, live in your home as a permanent resident and participate in counseling session with an approved HECM counselor ("About Reverse Mortgages for Seniors - Section 255 - Home Equity Conversion Mortgages (HECM)"). Unless you live in an expensive home, a HECM reverse mortgage will probably give you the most amount of money ("Frequently Asked Questions").
Tell Me About Private Reverse Mortgages Private reverse mortgages are provided by private companies ("Reverse Mortgages: Get the Facts Before Cashing In On Your Home's Equity"). Requirements for a private reverse mortgage may vary; however, most are easy to find, have no income or medical requirements and can be used for whatever you would like ("Reverse Mortgages: Get the Facts Before Cashing In On Your Home's Equity").
The rest of our Reverse Mortgage Guide:
