What Is The Best Reverse Mortgage Loan?

Many seniors are wising up to the benefits of getting a reverse mortgage loan. However, finding the best program for an individual's needs is important. Opting for the wrong program can cost the borrower thousands of dollars. Here are some pointers to help you along in choosing the one that'll best suit your particular circumstances.

You probably already know what a reverse mortgage loan is, but to recap: it's a government-backed financial tool that allows seniors to unlock the capital that is tied up in their home. Unlike a home equity loan, you do not have to make monthly repayments, risk losing your home because of missing monthly repayments, or have income or health checks (you don't make monthly repayments so the lender couldn't care less).

Instead, for this type of loan, you first have to be 62 or over and own nothing or very little on your home. The lender gives you money based on the equity value of your home, its location, current interest rates, and your age. You can receive payments in a number of ways though most prefer fixed amounts each month. You are guaranteed to receive payments as long as you remain living in your home.

The above is a quick overview; there are more points and features you should be aware of, so if you don't already understand how this type of loan works, then take a step back and go and find out the information you need before you begin searching for the loan itself.

HECM Reverse Mortgage Loan

A Home Equity Conversion Mortgages ( HECM ) is by far the most popular choice - over 90% of seniors choose this program. This type of loan is insured by the US government through the Federal Housing Administration insurance scheme that is administered under the auspices of the Department of Housing and Urban Development (HUD). Consequently, this loan is often referred to as an FHA or HUD reverse mortgage.

The government-backed insurance is its biggest plus; should payments received by the borrower exceed the value of the equity in the borrower's home, it guarantees to pay the lender any shortfall, so borrowers can rest assured that they will always get the money they're entitled to. The maximum amount you can get depends on the value of the home, location, interest rate, and age of the borrower. 

You can receive payments in 5 ways: fixed monthly payments, fixed monthly payments over a specified time frame, a line of credit, a combination of fixed monthly payments and line of credit, or a combination of fixed monthly payments over a specified time frame and line of credit.

Home Keeper Reverse Mortgage Loan

This program is administered by Fannie Mae. Although similar in many ways to the HECM program, it allows greater flexibility on the type of home that is eligible, like condominiums (though these must be FHA approved), pays less to couples but more to singles and the maximum amount that can be borrowed is larger. HECM's line of credit grows while Fannie Mae's line of credit does not.

Any broker who offers this program must also be part of the HECM program. Both programs require that the borrower receive information and counseling from an independent third-party advisor.

Proprietary (Jumbo) Reverse Mortgage Loan

These are set up and run by private companies. The biggest advantage is that there is no cap on the amount that can be borrowed against the equity in the borrower's home, so this type of program is good for those inexpensive homes who want to unlock a large amount of money. However, these loans are usually much more costly for the borrower, and not every program is available in all 52 states, whereas a HECM and Home Keeper are.

One final important point about a jumbo reverse mortgage loan is this: you do not have the option of receiving monthly payments; instead you can only elect to receive the money either as a lump sum or line of credit.

If I Have A High End Home, Are there Other Options?

Some homeowners might owe more than the total amount they are eligible to get with the FHA reverse mortgage. If their home are worth more than the Max Claim Amount (currently at $765,600), a Jumbo Reverse Mortgage info might suit you better.  With the jumbo reverse mortgage, appraisals as high as $10,000,000 are considered (homes valued at $1,500,000 or more will need two appraisals and the lower value is the one used).  With Jumbo Reverse Mortgages, you can borrow as much as $4,000,000 (assuming you meet the age and equity requirements).  However, there are exceptions available and sometimes you can borrow more than $4,000,000...Read Reverse Mortgage Info more about it...Thank you!