Three Types Of Senior Reverse Mortgage Programs

Filed Under Reverse Mortgage Loans | Leave a Comment

In its simplest form, a reverse mortgage is a special type of home equity loan that is only available to the senior community. And, unlike the more conventional home mortgage loans, this senior reverse mortgage loan is not repaid. The loan is repaid when the house is sold, rather than in payments. The reverse mortgage is a loan that is paid out in a lump sum or over time, and provides the senior community with much needed tax free income.

You will find three basic types of reverse mortgage programs available for the senior community.

The Home Equity Conversion Mortgage

The first, and most common type of reverse mortgage program is backed by the US Department of Housing and Urban Development (HUD), and is called the Home Equity Conversion Mortgage, or HECM. This type of senior reverse mortgage is insured by the Federal Housing Administration, which collects mortgage insurance premiums from seniors in the program. Through this insurance, HUD pays loan balances that are due once the home is sold and all proceeds have gone to the lender. If the home sells for a price higher than the loan amount, however, the proceeds remaining are added to the estate of the senior.

The Fannie Mae Home Keeper Loan

The second type of reverse mortgage program available to the senior community is the Fannie Mae Home Keeper loan. This reverse mortgage allows seniors that own large and valuable homes to take advantage of the reverse mortgage without worry of FHA caps on the loan amount. Additionally, the Fannie Mae Home Keeper loan is the only reverse mortgage that will allow a senior to sell their home and move into another but smaller home.

The Cash Account Loan Program

The third type of reverse mortgage program available for seniors is the Cash Account loan programs offered by private reverse mortgage lenders. These reverse mortgages allow seniors whose home value exceeds the caps set by HUD and Fannie Mae to take advantage of this financial solution. This type of reverse mortgage, however, is limited by location, and not all seniors will qualify for the loan. However, consumer safeguards are in place with these and all reverse mortgages to protect the senior through third party credit counseling.

No matter which of the three available reverse mortgage loans you choose to go with, the benefits can be good ones if you are fully aware of all the ramifications when taking out a reverse mortgage loan. Make sure to read all the find print before signing on the dotted line to ensure this approach works in your best interests.