Chapter 1
Chapter 2
Chapter 3
Chapter 4
Chapter 5
Chapter 4: Other Reverse Mortgage Programs

While the HECM is the most common reverse mortgage used, there are other types of reverse mortgages available:

  • Deferred Payment Loan - These are one-time, lump sum reverse mortgages provided by some local and state governments. Usually these programs are only available to homeowners with low or moderate income, and they may require a minimum borrower age. The deferred payment loan can only be used for specific repair projects allowed by each particular program. The interest rate is usually fixed, and in some programs all or part of the loan is forgiven after you have lived in your home for a certain number of years.

  • Property Tax Deferral Loans - Like deferred payment loans these loans are offered by some local and state governments. These loans can only be used to pay your property taxes.

  • Proprietary Reverse Mortgages - These are reverse mortgages created by private companies (who may let several lenders offer their programs) and not insured by the federal government. In general, they are still restricted to homeowners 62 and over, but the companies have more control over what features they offer than with the HECM. Homeowners with highly-valued homes may be able to get more money from a proprietary reverse mortgage than a HECM. However, proprietary reverse mortgages tend to cost more, and for the line of credit option the amount available usually does not grow over time, unlike with the HECM.

Should I Get a Reverse Mortgage?

Only you will be able to answer that question, but there are several factors that you should consider:

  1. How long are you planning to live in the home? If you are planning to sell your house in a few years usually a reverse mortgage does not make sense, since a large portion of the money you received will have actually gone towards closing costs. If you think you may have to go to a nursing home soon getting a reverse mortgage does not make sense either, since you have to pay it back if you leave your home.

  2. Have you considered moving as an option? Even if you have not thought about moving it is a good option to consider. Moving is a way to take the equity out of the house without taking out a loan, and it could also make sense if you are having difficulties maintaining the home. Of course, moving will only save you money if you purchase a cheaper home or rent. See what other living options are out there.

  3. How will this affect your heirs? If you want to leave your home to your children, or anyone else, a reverse mortgage will complicate the situation. If your heirs want to stay in the home they will have to pay back the reverse mortgage, or if they want to sell it the reverse mortgage will reduce the amount of money they receive. In general, a reverse mortgage can be paid off by refinancing with a traditional mortgage, so your heirs do not necessarily need to have a large amount of cash on hand to be able to keep the house. Your heirs will not be held responsible for more than the value of the house at the time of repaying the loan.

  4. Can you afford payments on a traditional mortgage or home equity line? If you have the money to make the payments on a traditional mortgage or home equity line that may be a better option, since the fees are usually lower and you do not have to worry about repaying the full balance if you leave the house.

  5. Do you really need the money? Do you need extra money to help pay for medical bills, or do you want to take a vacation? A reverse mortgage is an expensive way to finance purchases.

  6. Will you need the money more later? Remember, with a reverse mortgage the amount of money that you are going to be able to get is limited. If you use all the money you will not have it later, when you may need it more.

  7. Have you looked for other ways to increase your income? Are you able to get a part-time job or rent out a room in your house instead?

  8. Have you looked for assistance? If you have a limited income and are over 65 you may be able to get additional income from SSI (Supplemental Security Income). For more information you can call 1-800-772-1213. You also may qualify for food stamps. (Contact your county’s social service agency.) You local Area Agency of Aging (which can be found by calling 800-677-1116) can help you find programs in your area that provide assistance with utilities, food, prescriptions, and transportation.

Often it is helpful to discuss your options with family members, trusted friends, or a legal advisor. Be especially wary of anyone trying to sell you a product and pushing a reverse mortgage as a way to finance it.

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