Reverse mortgage examples

A reverse mortgage is a reversal of the normal mortgage.  It is when a lender (mortgagee) “pays” the borrower (mortgagor) for the equity in his/her house.  Home equity which is the difference between the fair market value of the house or farm and the any unpaid loan secured by the property plays a critical role in determining if a one will access a loan and the amount of loan to be advanced.

The federal government and even states have come up with different types of reverse mortgages in the United States.  This short discussion will attempt to mention the major examples of reverse mortgages.

Home Equity Conversion Mortgage

This is probably the oldest reverse mortgage example. in the United States.  It accounts for about 90 percent of all the reverse mortgages in.  HECM’s as they are usually called are insured by the Federal Housing Administration (FHA) which is a part of the United States Housing and Urban Development.  The amount available to a party will depend on your age, home value and current interest rates.  The older you are the more valuable your home.  Location is also a critical factor.

In calculating reverse mortgage limits under this scheme, the value of the FHA lending limit will apply.  Most of the compulsory fees like insurance, associated with the HECM are capped by the FHA.  For this scheme, if the Company managing your account, “the Servicer” collapses, and the government will ensure that you continue to access the funds.

There are limits that a lender can earn and they are set by HUD.  A lender can earn only upto to 2 percent of the maximum claim amount and this number is equal to the value of the home or FHA county lending limit, whichever is less.

Fannie Mae Home Keeper & Home Keeper for Home Purchaser

Fannie Mae may be known to many.  It is the nation’s largest investor for home mortgages and is also a major investor in reverse mortgages, including HECM’s.  Fannie developed its own product christened Home Keeper reverse mortgage in 1996. It was to be a conventional market alternative to HECM.  It came in to meet the needs that were left out by HECM. However, it should be noted that Fannie Mae is not a lender, but, it is only with its excuse that lenders can offer the Home Keeper product to consumers.

Conventional reverse mortgages/ The private cash account reverse mortgage

This is what is now offered by many lenders.  These are not insured by the federal government but have the same important particulars of a reverse mortgage.  They offer much more money in terms of loans than normal HECM reverse mortgages.  However, restrictions in terms of compulsory counseling and the non recourse feature which limits the amount a mortgagor owes to the value of the home will also apply. 

Due to their competitiveness, most lenders who offer HECM reverse mortgages will also offer this mortgage. This type of reverse mortgage has a growing credit line, flexible payment options, and often comes with higher closing costs

Choice of reverse mortgage

When it comes to taking up one of the products as a senior, regard should be had on many aspects.  Generally, HECM loans are the most accessible while the conventional may be only accessed by these whose home value is worth over$500,000.

References

1. http://www.reversemortgage.org/Default.aspx?tabid=231
2. http://www.mortgageloanplace.com/reverse_mortgages_types.html
3. http://srequityaccess.morfacts.com/types.html