Reverse mortgage – 3 Types and benefits

Reverse mortgage is a special type of loan offered only to the senior people. You have to be at least 62 years to get this loan. As the name suggests, instead of paying the lender, you get paid by the lender. This payment continues as long as you live in the house. You can take this option if you want to convert substantial home equity into cash.

Generally, reverse mortgage is tax-free. You can get the cash according to your choice i.e. either you can take a lump sum amount of money or you can have regular monthly cash payment.

3 Types of reverse mortgage

There are three (3) main types of reverse mortgage. They are:

• Single-purpose reverse mortgage: It is the cheapest option. You can use this for a single purpose. The purpose is specified by the government or the nonprofit lender. This allows you to pay for your house renovation, repairs or property taxes. You can get this loan if your income is low or moderate.

• Proprietary reverse mortgage: It is a private loan and the most expensive one. You can take out this loan if you belong to the high income group or you have a high home equity. You can use the loan for any purpose.

• Home equity conversion mortgage (HECM): It is also an expensive loan backed by the HUD. Compared to proprietary reverse mortgage, it gives larger loan advances at a lower cost. If your home appraisal value is more, you may get more loan advances. You can use the loan according to your choice. There is no income restriction.
Benefits of reverse mortgage
Some benefits of reverse mortgage are:
o You don’t have the risk of being a defaulter
o It is completely tax-free
o You have flexible payment options
o You can live in your home as long as you wish
Reverse mortgage is beneficial and lets you enjoy your last days in your own home, without having any tension of repayment. After you death, your heirs need to repay the loan or the loan should be paid off by selling your home.