Types of Reverse Mortgages

Types of Reverse Mortgages. Understanding the types of Reverse Mortgages.What Type of Reverse Mortgage is Right for You? A reverse mortgage is so called because you receive payments in exchange for your home equity. Reverse mortgages are only available to certain homeowners who meet certain requirements. Once you begin to explore reverse mortgage, you will notice two types: A home equity conversion mortgage (HECM), which is federally backed, and a proprietary reverse mortgage, which is privately contracted. At Reverse Mortgage Alabama, we help clients in Gardendale, and Mount Olive AL, determine which of these types of reverse mortgage will best suit their needs. Contact us with any questions you have about HECM and proprietary reverse mortgage today.

Understanding HECM Reverse Mortgage. An HECM is the most popular type of reverse mortgage. This type of reverse mortgage is regulated by the U.S. Department of Housing and Urban Development. It was designed to help seniors who would benefit from additional income utilize the equity in their homes toward that purpose. This is not a type of government loan, but is rather insured by the Federal Housing Administration in exchange for a small insurance fee.

To apply for an HECM, you must be at least 62 years old, receive counseling from a certified reverse mortgage counselor, have no federal debt, own most or all of the equity in your home and be able to pay for property tax, homeowners insurance and other living expenses. The maximum loan available for an HECM is $625,000.

Once you have been approved for an HECM, you must remain in your home, where you will no longer pay mortgage. You will receive monthly payments, a lump sum or a line of credit in exchange for the equity in your home. As long as you continue to meet the terms of your contract, you can live in your home until your death or you decide to end your contract.

Understanding a Proprietary Reverse Mortgage. A proprietary reverse mortgage is another option available to seniors in Gardendale and Mount Olive, Alabama. Unlike an HECM, a proprietary reverse mortgage is privately insured through a mortgage company, these now account for 1% of reverse mortgages and I wouldn’t recommend one. They have fewer regulations than HECMs because they are not federally insured. However, most proprietary reverse mortgage companies will still practice some of the requirements of HECM, such as counseling.

Receiving Your Payout – For HECM reverse mortgage options, you have the choice of how you would like to receive your payment. Some of our clients choose to receive their payment in a lump sum, while others benefit from a monthly supplemental income or a line of credit. If you live in the Gardendale or Mount Olive, Alabama call Scott Underwood “Alabama’s Reverse Mortgage Guy” with any questions or for a free consultation about your home and your financial goals. We offer honest advice and can help you explore all of your options..