How Does A Reverse Mortgage For Seniors Work?

A reverse mortgage for seniors is a loan program that is unique to seniors only. It is similar to a home equity loan, but with a twist. You do not pay back the loan amount until you either move out of the home or sell it. You are free to use the loan proceeds as you see fit. Reverse mortgage loan programs have become increasingly popular as more seniors look for ways to supplement their retirement incomes. Here is a look at how at the various reverse mortgage for seniors that are available.

To begin, you should know that there are only three basic types of reverse mortgage programs available for the senior community. The first, and the most common type of reverse mortgage program is backed by the US Department of Housing and Urban Development (HUD), and is called the Home Equity Conversion Mortgage, or HECM.

The HECM is a senior reverse mortgage that is backed up and insured by the FHA (Federal Housing Administration). They collect mortgage insurance premiums from seniors in the program. From this insurance, HUD pays out the loan balances that are due once the home is sold and all proceeds have gone to the lender. It is important to note that if your home sells for more than what the loan amount is, the money will be yours, or your estate.

The next type of reverse mortgage program for seniors is called the Fannie Mae Home Keeper loan. This is a wonderful loan program for seniors. It is especially useful for larger homes that have a lot of equity in them. It gives you the ability to take advantage of a reverse mortgage without worrying about the caps the FHA has in place on total loan amounts. In addition, another great aspect of this program is that the Fannie Mae Home Keeper loan is the only reverse mortgage loan program that will allow a senior to sell their home and move into another smaller home. That can be a tremendous financial advantage.

Finally, the last type of reverse mortgage loan for seniors are the cash account loan programs that many of your private reverse mortgage lenders offer. These reverse mortgages are good in that they allow seniors to get higher loans with homes that exceed the caps set by HUD and Fannie Mae. But, even though they do provide an excellent financial solution they are limited by location and it may be more difficult to qualify for the loan.

It should be noted however that government regulations are in place to protect consumers. Since reverse mortgage counseling is required you will have peace of mind in knowing what to be aware of with any lender.

These are the three main reverse mortgages for seniors that are currently available. You can find out much more about these programs online through many of the various websites on reverse mortgages. By doing a little research you will be able to find the perfect loan for your unique situation.