Reverse mortgages are specially designed for homeowners 62, and older looking to supplement their income, cover healthcare expenses, etc., by converting part of their home equity into cash. The homeowner retains the title and gets an advance on some of the home equity in lieu of paying monthly mortgage payments. While this may be enticing for some, it’s important to know that a reverse mortgage will eventually result in fewer assets for you and your family. Read on to learn about the different types of reverse mortgages, how to qualify, get the best deal, and more. 

While regular mortgages require homeowners to pay the lender monthly, reverse mortgages require the lender to pay the homeowner. Reverse mortgages allocate part of the homeowner’s equity and convert it to payments, tax-free. As long as the homeowner lives in the same home, they do not have to pay the money back unless they sell their home, move out, or pass away.

The three different types of reverse mortgages are: 

Single-Purpose: Offered by some state and local government agencies and nonprofits. They are the least expensive options and can only be used for home repairs, improvements, or property taxes. 

Proprietary Reverse Mortgages: Private loans backed by developmental companies; these are tailored towards higher-valued homes.

Federally Insured Reverse Mortgages: Also known as Home Equity Conversion Mortgages (HECMs), these are backed by the United States Department of Housing and Urban Development (HUD). Many factors are associated with HECMs, such as age, home appraisal value, interest rates, and more.

Lenders for reverse mortgages usually charge a service fee, closing fees, along with mortgage insurance premiums. As the homeowner acquires money, interest is added each month. So over time, the amount of money the homeowner owes rises with interest. Reverse mortgages often come with variable rates, which are associated with a financial index and fluctuate based on the market. Interest on reverse mortgages is not tax-deductible until the loan is paid off. With a reverse mortgage, the homeowner is responsible for property taxes, insurance, utilities, fuel, maintenance, and more. 

Reverse mortgages can be helpful for some people but might not be the best option for others. It’s important to compare fees, costs, understand total costs, loan repayment, and more. 

Are you interested in applying for a Reversed Loan? Contact the loan experts at EB Mortgage today. 

EB Mortgage is a locally owned mortgage company with experts in new home purchase, refinancing, and commercial loans. Our wholesale rates can’t be beaten. We offer more products, more options, and more solutions. Our “3C” Process is simple: complete our pre-approval request, consider options based on your requirements, and choose the offer that suits your needs best. Call us or e-mail us today!  

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