Types of Reverse Mortgages and Alternatives

HOME EQUITY CONVERSION MORTGAGE:  
     (HECM) Is by far the most popular and widely used (approx. 90%) and is the only federally insured reverse mortgage available. It is insured through the FHA (Federal Housing Authority) which is a department of HUD (HOUSING and URBAN DEVELOPMENT). Advantages of a HECM are that they provide the largest loan advances, they offer the most (5) choices in loan payment options, and there are no restrictions on how you may use the loan.

Privately Insured Reverse Mortgage (aka) Proprietary Reverse Mortgage:  
     These loans can usually be found through Banks, Credit Unions, and other financial companies and are mainly designed for people with very high home values. Since the increase of HUDs maximum home value limit which was increased to $625,500 (and has been extended until Dec. 2012) these loans have become more difficult to find.

Deferred Payment Loans (DPLs):
     Although not available everywhere, many Local and some States have Deferred Payment Loan Programs that are 1 time - lump sum loans that are to be used for specific home repair or improvement. Usually low to no upfront fees and simple interest charged for these loans. Usually these loans do not require re-payment as long as you continue to live in the home. These loans are usually only available for low or moderate income households age 65 and older (check your area for eligibility requirements). DPLs can sometimes be difficult to find because they operate under different program names. Contact your City or County Housing Dept, your County Office on Aging, or your State Housing Finance Agency and they should be able to help direct you in finding this program if available. Re-payment is made when property is sold.

Property Tax Deferral:
     Again not available everywhere, some States and Local Agencies have Property Tax Deferral Programs available. These public sector programs generally provide an annual loan advance to be specifically used towards paying property taxes. The eligibility requirements and coverage amounts vary greatly from area to area and State to State (Check your Local area). Usually low to no upfront fees and simple interest is charged to the loan. No re-payment is usually required as long as you continue to live in the home BUT most PTDs have a maximum time limit or amount limit and once that is reached no additional help is available. Re-payment is made when property is sold.

Conventional Home Equity Loan:
     If you are in good financial condition you may want to consider a Conventional Home Equity Loan. Theses loan are considerably cheaper than a reverse mortgage and as long as you can qualify and have the means you may want to use this as a way to postpone the timeframe of when a reverse mortgage would be more beneficial for you. Remember the older you are when you apply for a reverse mortgage is one of the key factors in determining maximum loan amount available to you. It is something to consider.

Sell your Home and Move:
     I know that most people when at the point of considering a reverse mortgage are trying to figure out a way to stay in the home that they have grown comfortable with. Just for the idea of making a good financial decision and not an emotional one, this is something that needs to be considered. For one moment let’s ask ourselves a few realistic questions:

(a)    If I sold my current house what could I Get For It?

(b)    If I took that money and down sized to a smaller house what would I be financially?

(c)    What if I rented a small apartment, again where would that leave me financially?

(d)    If I safely  invested what was left, what could I reasonably earn?

(e)    Is assisted living an option? (only you know your health and medical needs)

(f)    Have I checked all other possible living arrangements available to me?

     I know these questions are hard when considering leaving your home but they need to be asked and answered by you without emotions coming into play. Even if you decided that moving is not an option for you, now you can move forward with confidence knowing that all the alternatives have been considered and your current plan of action is the correct one for you.