Types Of Reverse Mortgages

There are three types of reverse mortgages each with their own upsides and downsides, they are as follows:

Single Purpose Reverse Mortgages

The lenders for single purpose reverse mortgages are usually non-profits or local governments. These loans can only be used for one specific purpose (thus the name), for example a local municipality may offer a reverse mortgage to seniors that can only be used to pay for their rates. A non-profit may offer a reverse mortgage for medical expenses.

This is the least common type of reverse mortgage and in general it has lower origination fees, ongoing fees and in some cases lower interest rates. They are by nature quite restrictive which often makes them an unattractive option for seniors who need a loan for a variety of reasons.

That said they are often over looked due to them not being available in all areas. If a borrower is looking for a loan for one specific purpose, it may be worth investigating a single purpose reverse mortgage.

Federally Insured Reverse Mortgages

These are also commonly known as HECM reverse mortgages, these are insured by HUD (department of housing and development) and are the most commonly used reverse mortgage currently in the market place.

Proprietary Reverse Mortgages

These are provided by financial institutions, they are commonly extremely large loans sometimes also known as a jumbo reverse mortgage.