3 Types of Reverse Mortgages

• Single purpose reverse mortgages
• Federally insured reverse mortgages or home equity conversion mortgages
• Proprietary reverse mortgages

Single Purpose Reverse Mortgages
These are offered by some state and local government agencies and nonprofit organizations. Single-purpose reverse mortgages generally have very low costs.

Restrictions:

• Usually not available everywhere
• Can only be used for one purpose as specified by the government or nonprofit lender, i.e, pay for home repairs, improvements, or property taxes
• Generally only people with low or moderate income qualify

Home Equity Conversion Mortgages (HECM)
These loans are back by the U.S. Department of Housing and Urban development. They are more costly than normal home loads, with high up-front costs. There are no restrictions and would not be cost effective unless you will be in your home for a fairly long time. However, these loans are generally for higher amounts of money at lower costs than a proprietary reverse mortage (see below.) In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.

Restrictions/Requirements:

• Meeting with a housing counseling agent
• Understanding costs, finances and alternatives
• Finding out what other things you qualify for
• The amount of money is related to your age, the value of your home and how much you owe on it

Options on receiving the money:

• Fixed monthly cash advances for a specific period
• Fixed monthly cash for as long as you live in your home
• Line of credit (ie. you can draw on the load at any time in set amounts)
• Combination of monthly payments plus a line of credit

Proprietary Reverse Mortgages
These are private loans that are backed by the companies that develop them. Like HECMs, these also tend to be more costly than other home loans. The up-front costs can be high, so they are generally most expensive if you stay in your home for just a short time. They are widely available, have no income or medical requirements, and can be used for any purpose.

Like HECM, the amount of money you can borrow depends on your age, the appraised value of your home, current interest rates, and where you live. In general, the older you are, the more valuable your home, and the less you owe on it, the more money you can get. Often more costly than HECMs, you may get bigger loan advances if you have a higher appraised value without a large mortgage

Reverse Mortage Loan Features
The following is true of all three types of reverse mortgage detailed above:

• Reverse mortgage loan advances are not taxable
• They generally do not affect Social Security or Medicare benefits
• You retain the title to your home
• You do not make monthly repayments
• The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence