Are there different types of reverse mortgages?
Yes. Most reverse mortgages today are insured by the Federal Housing Administration (FHA), as part of its Home Equity Conversion Mortgage (HECM) program. If you apply for a HECM loan, you can choose from the following options:
- Payment of loan proceeds. You can receive loan money as a line of credit, monthly installment, a combination of these, or a lump sum.
- Interest rate. You can choose between a fixed interest rate and an adjustable interest rate. Fixed interest rates are only available with the lump-sum payment option.
The HECM program also offers two special-purpose loan options for special circumstances:
- HECM for Purchase. HECM for Purchase allows you to purchase a home using money from a reverse mortgage loan.
- HECM Refinance. HECM Refinance allows one HECM loan to be converted into another HECM loan. The typical reason for refinancing is to get a lower interest rate, if one is available, or to borrow more cash, if the home value has gone up.
Non-HECM Reverse Mortgages
Single-purpose reverse mortgages are also offered by some state and local governments and non-profit organizations. These are used only for the purpose specified by the lender (for example home repairs or property taxes). They may only be available in some areas for homeowners with low to moderate income. These non-HECM reverse mortgages are not federally insured.
Some lenders also offer proprietary reverse mortgages, which are not federally insured. These are typically designed for borrowers with higher home values.
HUD is the federal Department of Housing and Urban Development. It is charged with training and certifying counselors who will give reliable advice.