Wondering how many types of reverse mortgages there are? You’ve come to the right place. In this blog, we’re going to take a look at the 3 types of reverse mortgages and talk about which one may be best for you. Keep on reading to learn more about reverse mortgages.
Single-Purpose Reverse Mortgages
Single-purpose reverse mortgages are the least expensive option. This type of reverse mortgage is offered by non-profit organizations, as well as, both state and local government agencies, but is not available anywhere else.
The name of this type of reverse mortgage is quite literal. You can only use the funds received for this mortgage for one purpose, which is specified by your lending institution. For example, your lender may say your loan is specifically for home repairs, renovations, or property taxes.
Proprietary Reverse Mortgages
A proprietary reverse mortgage is a private loan backed by a company that develops them. With this loan type, you will usually qualify for more funds and get a bigger loan advance. Proprietary reverse mortgages are not backed by the government, so mortgages like these are only attainable by private lenders.
Home Equity Conversion Mortgages (HECMs) for Purchase
A HECM for Purchase is the best type of reverse mortgage if you’re looking to purchase a new home. This mortgage type will allow you to finance a home and purchase one, with just one transaction, all while never paying monthly payments.
How Much Can You Borrow?
While you’re wondering what the 3 types of reverse mortgages are, you’re probably thinking about how much you can borrow. The exact amount you can borrow depends on the following factors:
- Your age
- The mortgage you choose
- The current value of your home, determined by a professional appraisal
- The current interest rates of your lending institution
- The results of your financial assessment
Which One Will Work Best For You?
Now that you know the different types of reverse mortgages and what they are, let’s talk about which one will work best for you.
- Single-Purpose Reverse Mortgages – If you want to renovate, repair your home, or pay property taxes, a low-cost single-purpose loan is best. Costs are low and it’s generally straightforward to be approved. Homeowners with low or moderate incomes usually qualify for these loans.
- Proprietary Reverse Mortgages – A proprietary reverse mortgage may be best for you if you live in a high-value home and want to borrow a larger amount of money. The value of your home will put you in a better position to gain access to a higher loan amount.
- HECMs – If you would like to downsize, move to a new neighborhood, or move into a home without stairs, a HECM is definitely the best option for you. This mortgage type will help to move into your new home while helping you liquify cash from your old one, all at the same time.
Regardless of the types of reverse mortgage you choose, it’s important to ensure you understand all fees, costs, and the process of loan repayment.