Consider Different Reverse Mortgage Options

Understanding Reverse Mortgage Options: A Guide to Choosing the Right Type

Reverse mortgages come in several forms, each with distinct features and benefits. The three primary types are single-purpose reverse mortgages, federally insured reverse mortgages, and proprietary reverse mortgages. Evaluating the pros and cons of each option is crucial when considering a reverse mortgage.

Single-Purpose Reverse Mortgages

Single-purpose reverse mortgages are the most cost-effective option and are generally provided by state or local government agencies. However, as the name suggests, they can only be used for one specific purpose. These loans are ideal for individuals needing funds for particular expenses, such as paying property taxes or home repairs. Key types include:

• Property Tax Deferral (PTD) Mortgages: These reverse mortgages offer loan advances specifically for paying property taxes.

• Deferred Payment Loans (DPLs): These provide lump sum disbursements for home repairs or improvements.

Federally Insured Reverse Mortgages

Federally insured reverse mortgages are backed by the Federal Housing Administration (FHA). Known as Home Equity Conversion Mortgages (HECMs), these loans offer some of the lowest costs and the highest overall cash benefits among reverse mortgage options. HECMs are versatile and can be used for any purpose, making them a popular choice for many borrowers.

Proprietary Reverse Mortgages

Proprietary reverse mortgages are offered by private companies and tend to be more expensive than other types of reverse mortgages. They are generally suited for homeowners with high-value properties, as these loans often have higher home value limits compared to HECMs. While proprietary reverse mortgages can offer larger loan advances, it is important to compare them with similar HECM options to ensure you are getting the best deal.

Choosing the Right Reverse Mortgage

Given the complexities of reverse mortgages, seeking professional guidance is essential. Reverse mortgage counsellors can help you assess each option and determine which type best fits your financial needs and goals. Their expertise will assist you in making an informed decision and ensuring that you select the most suitable reverse mortgage for your situation.