The three basic types of reverse mortgage are: single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations; federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD) or Federal housing Administration (FHA); and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.
Single-purpose reverse mortgages generally have very low costs. But they are not available everywhere, and they only can be used for one purpose specified by the government or nonprofit lender. An excellent example is the city of Madison, WI which allows seniors over 65 with less than 30,000 in income to pay their property taxes with a modified reverse mortgage. In most cases, you can qualify for these loans only if your income is low or moderate.
HECM’s and proprietary reverse mortgages tend to be more costly than other home loans. The up-front costs can be 2% FHA and 2% origination fee plus all the normal fees associated with a mortgage (closing costs). Like a refinance if you plan on being in your house a short amount of time, it may not be worthwile to take out a reverse mortgage. These mortgages are available just about anywhere and have no credit or income requirements. The money you receive either upfront or monthly can be used for whatever you want. There is also the option of getting a line of credit, which provides even more flexibility.
Before applying for a HECM, you must meet with a counselor from an independent government-approved housing counseling agency. The counselor must explain the loan’s costs, financial implications, and alternatives. For example, counselors should tell you about government or nonprofit programs for which you may qualify, and any single-purpose or proprietary reverse mortgages available in your area. They can’t steer you to a particular lender but can tell you what to expect. In the State of Wisconsin you can do this over the phone if you can’t get to a counseling place.
The amount of money you can borrow with a HECM or proprietary reverse mortgage depends on several factors, including your age, the type of reverse mortgage you select, the appraised value of your home, current interest rates, and where you live. In general, the older you are, the more valuable your home, and the less you owe on it, the more money you can get.
The HECM gives you choices in how the loan is paid to you. You can select fixed monthly cash advances for a specific period or for as long as you live in your home. Or you can opt for a line of credit, which allows you to draw on the loan proceeds at any time in amounts that you choose.You also can get a combination of monthly payments plus a line of credit.
The last type is the proprietary reverse mortgage, which is a reverse mortgage that is backed and owned by the mortgage company that markets it. Proprietary reverse mortgages are generally the most expensive type. If your home is worth more than the HUD’s 203b limit for your county you may be able to get out more money than with the HECM. if you have a higher appraised value without a large mortgage, then you may likely qualify for greater funds. Location (for example, your neighborhood) is only one part of the determination of appraised value.It is also possible it may be less expansive than an HECM in the early years of the mortgage because the insurance is not required.
As you can see some investigation needs to go into obtaining a reverse mortgage. you must make sure you are financially making the right decision when going with this type of loan program. As always make sure you seek out and expert in Wisconsin Reverse Mortgages who can help answer your questions.
+ There are no comments
Add yours