Are All Reverse Mortgages The Same ?

Reverse mortgages are made for senior citizens as a way of providing them with steady source of income. Usually this type of mortgage is available only if the senior has equity in his or her home, which cashed until the senior decides to sell the home or move away.

The senior has to be 62 years and older to be eligible for reverse mortgage.Reverse mortgage is a unique concept, and is quite different from the traditional mortgage. In reverse mortgage, the lender gives the senior a fixed amount each month. The amount will be paid as long as the person lives in the house. If the borrower dies, or the home is disposed off, the lender will then take steps to recover the mortgage. If the house is sold for more than what it is worth, then the balance amount is given to the heirs. Therefore, just value of the house is taken into consideration when giving a reverse mortgage.

There are different types of reverse mortgages, and many seniors who are contemplating on this type of mortgage actually wonder whether all reverse mortgages are the same. The answer is no. There are primarily three types of reverse mortgage, and they are single purpose reverse mortgage, home equity conversion mortgage and propriety mortgage.

In the single purpose reverse mortgage, the mortgage is given to seniors who have moderate income levels. This type of mortgage is viewed as a way of helping the senior meet certain obligations associated with the home like repairs, renovations and payment of taxes. This mortgage is backed by local and state governments.

The home equity conversion mortgage, also referred to as the HECM, is guaranteed by the Housing and Urban Development. This mortgage is insured by the federal government is dearer than the single purpose reverse mortgage. You would have to meet a counsellor to discuss this type of mortgage and get all the information regarding the risks and costs involved.

The proprietary mortgage is given by private companies, and it is not mandatory to have a meeting with a mortgage counselor. This type of reverse mortgage is similar in nature to the home equity conversion mortgage, and is equally expensive when compared to the single purpose reverse mortgage.