If you are giving serious consideration to applying for a reverse mortgage, you should be aware that there are three different types available to consumers. These are:
•Single-purpose: Single-purpose reverse mortgages are designed to be used for one specific purpose, such as paying back taxes or making necessary home improvements. They are typically available only to low-to-moderate-income individuals. This type of loan usually comes with the lowest interest rates and associated fees.
•Federally-insured home equity conversion mortgages: Also referred to as HECMs, these are the most common type of reverse mortgage. In fact, the National Reverse Mortgage Lenders association reports that HECMs account for approximately 90 percent of all reverse mortgages. They are backed by the U.S. Department of Housing and Urban Development. You are not required to meet any particular income requirements and you can use the funds for any purpose. However, you must be at least 62 years old, reside in the home you are reverse mortgaging and meet with an independent government-approved housing counselor before you can apply.
•Proprietary: Proprietary reverse mortgages are private loans that are backed solely by the companies that provide them. These loans are sometimes referred to as “jumbo reverse mortgages” because they are designed to meet the needs of those with homes valued at around $750,000 or more. While proprietary reverse mortgages are not subject to the same regulations as federally-backed loans, most lenders offer similar protections to consumers.