The Different Types of Reverse Mortgages
Most of us have heard of reverse mortgages before. However, many people did not know that there are three different types of reverse mortgages that you can choose from. Here is an explanation of the three different types to help you make the best decision for yourself.
The first is a FHA-Insured loan. This has three different payment options: lump sum, monthly advances, and line of credit. This loan is not due to be paid back as long as you live in your home. The interest on this loan is charged at a flexible rate on your loan balance. If the interest rate does change it will not affect the monthly payment, instead it changes how the loan balance grows over the length of the loan.
There are a couple drawbacks when it comes to the FHA-Insured loan however. The first is that this type of reverse mortgage may provide smaller loan advances than lender-insured reverse mortgages. They are also likely to cost more than the uninsured reverse mortgage would.
A Lender-Insured reverse mortgage has your choice of monthly loan advances or monthly loan advances plus a line of credit. This reverse mortgage like with the FHA-Insured reverse mortgage is good for as long as you live in your home. You also have your choice of having your interest rate be a fixed rate or an adjustable rate. The additional loan costs can contain a mortgage insurance program as well as other various loan fees. If you do not want to put all of the equity of your home into a reverse mortgage you do not have to if you get a Lender-Insured reverse mortgage.
This type of loan too has its disadvantages. Loan advances from this type of reverse mortgage may be larger than FHA-Insured reverse mortgages offer, however they typically have larger costs as well. While some of these reverse mortgages will give you an annuity even after you sell your home, this annuity can sometimes affect your ability to receive Social Security Income.
The last type of reverse mortgages is an Uninsured reverse mortgage. This type of reverse mortgage is considerably different from the previous two. With this plan you will receive a monthly loan advance for a fixed term only. When you take out the loan you will select a definite number of years that you will receive the loan advances. When the advances stop is when you loan becomes due.
If you are thinking of getting a reverse mortgage it is important to know that there is more than one type of loan that you can get. You also need to know the differences between them. Being informed is the only way to make the best decision for you.