Reverse Mortgages 101: Three Types of Reverse Mortgages

When accessing the equity in their homes, seniors have different options to consider when applying for a reverse mortgage.

Just like with regular mortgages, seniors have to consider different types of reverse mortgages to determine which one is best for their situation. Some of the factors that influence decisions about reverse mortgages include:

• The purpose of the loan

• The income of the senior

• The amount of equity in the home

• The value of the home

• The amount owed an any existing mortgage

Three Types of Reverse Mortgages

The three main kinds of reverse mortgages include:

• Single Purpose Reverse Mortgages: While not available in all areas of New Jersey, the proceeds from these loans can only be used by the purpose specified by the lender. For example, if senior’s home needs repairs, a non-profit or local agency may offer this type of reverse mortgage.

• Federally Insured Home Equity Conversion Mortgages (HECM): Backed by HUD and FHA, these reverse mortgages offer the advantage of being able to use the funds for a variety of purposes. The senior must make arrangements for a HUD certified counselor prior to obtaining the mortgage and there are limits to the amount the person can borrow.

• Proprietary Reverse Mortgages: Private lenders offer these home loans, so they do not have the loan caps that HECMs do. The downside of these reverse mortgages is that the fees and interest rates tend to be higher than single purpose reverse mortgages or HECMs.

To learn more about your options, contact a reverse mortgage expert today!