As some of you may know, a reverse mortgage is a type of loan for homeowners aged 62 and above where the borrower uses their home equity as collateral and receives payment either through lump sum, line of credit, monthly payments, or a combination of them. The loan is paid when the borrower dies or moves out of the property. To find out the amount on your reverse mortgage loan, you can use a different reverse mortgage calculator.
When the loan is due, the heirs/ estate can choose to either pay the loan or sell the house to repay the debt. In the event that the house sells for less the value of the loan, the estate will not pay the difference through other assets except through the property itself. However if the property sells for more than the amount due, the remaining balance is then handed over to the heirs.
Now what are the types of reverse mortgages?
As an overview there are many types of reverse mortgages and their offers may vary along with the requirements. This will depend on the state you are in and the governing laws that affect this type of program. Different reverse mortgage calculators will also be affected by said factors.
`-Single purpose mortgages
Single purpose mortgages are the less expensive option. They’re offered by some states and government agencies and other non-profit organizations, but are not always present in some areas. They’re called single purpose loans because they are loaned for one purpose only, which will be specified by the lender. The lender can declare that this loan will only be used to pay medical bills, if the borrower agrees, then the transaction is made. Home owners with low to moderate income can qualify for these loans.
-Proprietary reverse mortgages
These loans are private loans which are backed up by the companies that develop them. If you own a high value property, you can qualify to get a bigger advance from your reverse mortgage loan. So in other words, if you have a home that is of higher appraised value, and you have a very small mortgage, you will then be able to qualify for bigger funds.
-Home equity conversion mortgages
These types of loans are federally insured mortgages and are backed up by the HUD (U.S. Department of housing and Urban Development). HECM loans can be used for whatever purpose the borrower may have. Whether it’s for a family vacation, medical expenses or to buy a new car, the homeowner has the right to spend the loan on where he sees it fit.
HECM loans and proprietary reverse mortgages are typically more expensive than traditional home loans, and the upfront costs can be quite high. So it’s best to do a bit of research yourself and try to see if how much you can get if you choose to get this type of loan. Reverse mortgage calculators will give you a general idea on how much you can get for your home. There are many reverse mortgage calculators online and sometimes differ in their answers, so be sure to use the right one in your research.
The idea of getting a reverse mortgage loan can be quite scary for some since it’s a big financial decision. So think things through and better understanding of reverse mortgage loans is very important.