Reverse Mortgage Loan

A Reverse mortgage loan is only available for seniors. It differs significantly from a home equity loan in that there are no monthly payments, title deeds stay with the home owner and not the lender, there is no fixed period of time when the loan must be paid back - it's only payable when the borrower(s) sell the house, the house in no longer the primary residence or the borrower(s) die.

Depending on your individual circumstances, a reverse mortgage home equity loan might be a better option than either 'downsizing' your home, or taking out a traditional home equity loan.

There are 3 types of reverse mortgage home loan available. Each type offers something different. Before deciding on which would be best for you it is necessary to understand the basic fundamentals of each.

FHA Reverse Mortgage Loan

First offered in 1989, this is the oldest type of reverse mortgage loan and is usually referred to as a HECM reverse mortgage (Home Equity Conversion Mortgage ). It is by far the most popular and best reverse mortgage loan program for most. Indeed, it represents over 95% of reverse mortgage loans taken out in the US. Its main key points are:

A product designed by Federal Housing Administration (FHA), an arm of the U.S. Department of Housing and Urban Development (HUD). It is a government insured loan. It ensures that you will always receive your payments that are due, no matter if the broker who sold you the original program goes out of business for whatever reason.
Maximum Lending Limit - can reach $362,790 depending on the geographic area (adjusts annually)
The homeowner must be 62 years of age or older.
Flexible income payment option.
Available balance on line of credit grows annually.
A program requirement is that all applicants must receive counseling by an approved third party before the loan is approved.
There are no income, health checks.
Social Security or Medicare eligibility may not be affected, and generally neither are SSI or Medicaid/MediCal (Consult The Social Security Administration and your tax professional).
The loan is tax free.
You can spend the money any way you want.

Fannie Mae Reverse Mortgage Loan

Fannie Mae was created in 1938, under President Franklin D. Roosevelt, at a time when millions of families could not become homeowners, or risked losing their homes, for lack of a consistent supply of mortgage funds across America. In 1968, Fannie Mae was rechartered by Congress as a shareholder-owned company, funded solely with private capital raised from investors on Wall Street and around the world.

The Home Keeper® program is a Fannie Mae reverse mortgage. It was developed to address certain needs that could not be served by the HECM program, such as individuals with higher property values, condominium owners, and seniors wishing to use a reverse mortgage to purchase a new home. The maximum lending limit is $417,000.

Proprietary Reverse Mortgage Loan

These are owned and financed by private companies. They are the most expensive type of reverse mortgage. However, they have an advantage over both Fannie Mae and HECM reverse mortgages in that the loan amount can be significantly higher if your home's values is high. Both Fannie Mae and HECM have capped limits whereas proprietary reverse mortgages have no such limitations. At present there is only one company that offers a program in all 50 states - Financial Freedom. However, more companies will be expanding their operations over the next few years.

Although higher loans are available you should be careful that a proprietary reverse mortgage is best for you. For example, the most widely available proprietary plan offers a credit line that does not grow larger over time. So what seems to be a smaller HECM credit line - which grows larger over time - can provide more total cash than an initially larger credit line from this proprietary plan.

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Reverse Mortgage Loan