Types of Reverse Mortgage
Even though different reverse mortgage companies
offer products and loans by different names, the cores of their options are very similar. A reverse mortgage is often referred to as a home equity conversion mortgage (HECM). A HECM is a type of a reverse mortgage that is insured by the FHA.
- HECM Standard program
The most common type of reverse mortgage today. There are fixed-rate and adjustable rate HECMs.
- Fixed Rate (This loan is not available anymore)
Similar to a traditional mortgage where a fixed rate will always result in the same monthly mortgage payment throughout the life of the loan, the fixed rate HECM will result in a fixed interest rate for the life of your loan. This type of loan is often used when a borrower wants to lock in the low interest rate and receive a lump sum payment at closing.
- Adjustable Rate
Borrowers who wish to receive a monthly disbursement end up with some sort of adjustable rate reverse mortgage. This type of loan offers the most flexibility and allows seniors to combine various ways of disbrusement into their reverse mortgage. For example, a borrower can take out an adjustable HECM with a combination of a small lumpsum payment and a set monthly payment. Adjustable rates are usually a little lower than the fixed-rate loans.
- HECM Saver Reverse Mortgage
The HECM saver loan has lower initial fees but has a stricter policy when it comes to borrowing against the property.
Refinancing Reverse Mortgage
If the property value has increased or if reverse mortgage rates have dropped, refinancing an existing reverse mortgage may be a good idea.