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.
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David Forer is an expert on Wisconsin Reverse Mortgages
with over 15 years experience with credit repair, debt
management, and mortgages in the state. He has a free
informational e book on Reverse Mortgages at
http://www.wisconsinreversemortgages.net/ebook.html
this
is not a sales book!
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