FHA Reverse Mortgage
FHA reverse mortgage? The Federal Housing Administration insures reverse mortgages and protects you against possible lender defaults. As the FHA will guarantee your reverse mortgage, this is often considered the safest option. However, compared to lender-insured reverse mortgages, FHA insured reverse mortgages will usually provide smaller loan advances.
The payment options for this type of mortgage would mainly be a monthly payment and a line of credit.
Otherwise, the features are similar. Payments on the loan amount are only due after you no longer live in the house, and there would be fixed closing costs and mortgage insurance premiums to be paid.
HECM reverse mortgage
The Home Equity Conversion Mortgage Program offered by the FHA is the most popular type of reverse mortgage. Another highly popular one is the Home Keeper reverse mortgage. These mortgages are available in every state.
As for private mortgages, the Equity Guard and the Cash Account Plan are also very popular. They are offered by the Financial Freedom Senior Funding Corp.
Lender insured reverse mortgage
The main alternative to a FHA insured reverse mortgage is a lender insured reverse mortgage. This type of mortgage provides you with several advantages. Compared to a FHA insured mortgage, the lender insured reverse mortgage allows you to borrow a larger amount, while also allowing you to mortgage only a portion of your property. You can therefore retain a portion of the home equity for other uses, possibly for your children.
Lender insured mortgages can be an excellent idea, so long as you research the financial strength of the company which backs the mortgage carefully. Check the financial ratings and ensure that the company you are turning to is well-established.
Uninsured reverse mortgage
The third type of reverse mortgage is the uninsured reverse mortgage. This type of mortgage offers monthly payments only for a fixed number of years, after which loan payments are due. While monthly payments can be significantly higher and there is no mortgage insurance premium to be paid, you need to be certain of how to repay the loan when it expires. Otherwise, you may have to sell off your property.
In general, consider a FHA reverse mortgage or a lender insured reverse mortgage; an uninsured reverse mortgage is usually not worthwhile.