Yes. The types of reverse mortgages are really based on their different payment options. All of the following are allowed under the FHA home equity conversion mortgage where reverse mortgages with lines of credit are not permitted. The qualification requirements for both the buyer and the property are the same for all payment options.
Tenure. Equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence. The age of the borrower (life expectancy) and equity in the property determine how much can be borrowed. The borrower receives payments until death, as long as the ownership and occupancy requirements are satisfied.
Term. Equal monthly payments for a fixed period of months selected. The age of the borrower and equity in the property determine the amount that can be borrowed. The borrower then decides on the amount of the payments. The higher the amount, the shorter the time over which he or she is paid. Once all payments are made, the borrower does not receive any more money - but there is no repayment required as long as the borrower continues to live in the home.
Line of Credit. Unscheduled payments or installments, at times and in the amount of the borrower's choosing, until the line of credit is exhausted. A reverse mortgage line of credit is the same as an equity line of credit, in that the borrower uses the credit without restriction until the limit is reached.
Modified Tenure. A combination of line of credit with monthly payments for as long as the borrower remains in the home. An example is probably the easiest explanation. The borrower qualifies for a loan of US Dollars 100,000. Based on age, the monthly payment for life is US Dollars 500. However, the borrower would like to be able to have a chunk of immediate cash available. The borrower opts for a line of credit for US Dollars 50,000 and takes the balance (US Dollars 50,000) in payments of US Dollars 250 monthly.
Modified Term. A combination of line of credit with monthly payments for a fixed period of months selected by the borrower. This works just like modified tenure except that the amount remaining after deducting the line of credit is paid over an agreed-upon time period, rather than over the borrower's lifetime. The type of loan can be changed if the borrower's circumstances change. Unlike the expense of a refinance, the cost of restructuring the way the borrower receives the money is currently US Dollars 20.
The two most important factors that distinguish the FHA-insured reverse mortgage from other reverse mortgages are tenure borrowing (lifetime income) and the increase in the amount to be borrowed. Unlike most other reverse mortgages, the HECM increases the amount available to the borrower. This is based on a rising real estate market. Check with your counselor for the current policy. Example: If you are originally qualified to receive a mortgage amount of US Dollars 100,000, that amount will increase each year. Let's use a hypothetical rate of increase of 6%. You would have US Dollars 106,000 available one year after the original qualification if no money was used.
If you chose a credit-line account and withdrew US Dollars 6,000 at the end of each year, the original US Dollars 100,000 would always be available. With other reverse mortgages, a withdrawal of US Dollars 6,000 per year would simply reduce the amount available to US Dollars 94,000, US Dollars 88,000, US Dollars 82,000, and so on. The major disadvantage of the HECM is the amount of money that can be borrowed. If your home is worth much more than the FHA limit in your area and you want to borrow the most you possibly can, you will want to investigate other reverse mortgage options. There are several companies that offer reverse mortgage loans well beyond the limits of the HECM. These loans are generally more expensive and some do not allow lifetime payments.
A good place to start is the AARP website. AARP will take the information for your specific situation and give you a comparison of the costs involved in the available programs. It has nothing to sell you, so the information is unbiased. Many major banks also have websites that offer help. There is no shortage of companies wanting to get you a reverse mortgage loan. As with any loan that you want, some shopping around will give you a better idea of what is available that best suits your needs.
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