Reverse Mortgage Loan Options

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Our reverse mortgage brokers will help you choose the right loan option for your particular need. Our tailored solutions focus on meeting your needs while mitigating all potential risks. We seamlessly integrate our expertise with your existing financial standing to generate up-to-date, thorough, and well-educated prospects.

One of the benefits of working with us is our licensed reverse mortgage specialists, who are there to back you up throughout your journey.

There are various options available to you when you’re taking out a reverse mortgage loan. Usually, the option you go with would depend on you and of course, the options that your lender is offering.

If you already have a foreknowledge of the option that you want to go with, all you have to do is look for a genuine and authentic lender and how with them.

But if you’re not certain of the option to go with, the best move would be to weigh the pros and cons of each option and then choose one that is best suited to your needs, either in the short-term or in the long-term.

This clearly implies that your needs are the major determining factor when it comes to choosing a reverse mortgage loan option. If you feel like you cannot make the decision on your own, you can always talk to a reverse mortgage expert.

However, sufficient research should provide you with all the knowledge that you need to make an informed decision. 

Whether you intend to make a major purchase that would be costing lots of money, or your story is that you would like steady income every month, there are various options that would best suit your needs.

Available Loan Options

There are four loan options available namely: 

  • Fixed-Rate HECM
  • Adjustable-Rate HECM
  • HECM for purchase
  • HomeSafe

Fixed-Rate HECM

This loan option provides an easy way to tackle projects that require a major sum of money. Funds from this loan are given as a lump sum and then the interest rate is locked in place immediately when the loan closes.

If you’ve got some outstanding mortgage balance that you cannot cover, this option might be a great idea. However, you would still have to pay insurance and property taxes of course.

Fixed-rate HECMs help to remove the uncertainty that you would encounter if you opt for an adjustable-rate. This is because right from the onset, you’re already in the know about the interest rate placed on the loan for the entire lifespan of the loan.

This implies that for the entire duration of the loan, the interest rate remains the same and this option allows only lump-sum disbursements of loan funds.

It is essential to ensure that whatever amount you would be receiving when the loan is closing would completely cover for your needs.

Typically, most people use a fixed-rate HECM for paying off mortgage balances, property liens, covering medical bills, major home repairs or renovation, or as a source of funds for day to day expenses while other assets and investments are left to appreciate in value.

The HUD places restrictions on the loan amount that a borrower would have access to when the loan is closed or in the first 12 months after the loan is closed. If a portion of the fixed-rate loan is restricted, then the borrower would have to forfeit such funds.

However, given that you would be working with an experienced lender, you should not experience this at all.

Adjustable-Rate HECM

Adjustable-rate HECM is otherwise known as variable rate HECM and is the flexible version of a HECM loan. This loan option allows borrowers to access their funds in various ways depending on the choice of the borrowers of course.

The interest rate on an adjustable HECM fluctuates from year to year as a result of various market conditions. Borrowers may decide to withdraw a lump sum, opt for monthly payments, or even use a line of credit that may continue to grow with time if it is left unused.

The option of a line of credit is a great option if you’re taking emergencies into consideration. In addition, you would be building a resource that can be easily accessed and in certain cases, may end up exceeding your home’s value.

Also, since the line of credit encourages the use of a reverse mortgage as a tool for retirement, it can make a major positive impact on retirement plans. It basically gives you the flexibility that you might need in accessing your home equity.

Funds gotten from the adjustable rate can be gotten in multiple draws, therefore, funds that cannot be accessed as at when the loan closes or even in the initial 12 months would still be available to the borrower.

The adjustable-rate is available in multiple draws so any funds not available at closing or in the first 12 months are available to the borrower after 12 months’ time.

HECM for Purchase

The HECM for Purchase (H4P) enables eligible borrowers to purchase a home with the help of loan proceeds. This loan is officially HUD-approved and issued by the FHA in the United States.

HECM allows people to invest in a home without having to constantly worry about paying monthly loan installments. Moreover, all properties that are eligible for a traditional HECM are also eligible for H4P loan.

This is a great initiative for people who want to relocate to a new location for various reasons that could arise out of retirement, children leaving for college, or even wanting to stay closer to their loved ones.

The H4P mortgage eligibility criteria are quite similar to the traditional HECM loan. It requires the borrower to be a minimum of 62 years of age and to select an FHA approved residential property.

Some features of HECM for Purchase

  • It makes it possible to purchase a high-value home by leveraging funds.
  • The maximum claim amount for H4P is either the appraised value of the property to be purchased, the selling price, or the FHA single-home mortgage limit. The one that costs the least is applied.
  • The FHA requirements ensure a trouble-free investment since they do not approve any property that lacks basic facilities like central heating, damaged installations, faulty electrical system, etc.
  • The H4P closing costs include origination, appraisal, recording, and notarial fees.
  • This loan does not provide the right of rescission. 

HomeSafe

HomeSafe® is a non-FHA adjustable rate that allows borrowers access to as much as 75% of loan proceeds in the form of an open-ended line of credit. Just like any other reverse mortgage, HomeSafe® is a non-recourse loan as well. 

It is basically the singular proprietary reverse mortgage product in the US that allows borrowers to make use of a line of credit while at the same time allowing them to access and leverage some of their home equity. All this while, borrowers also have the flexibility to access extra funds whenever they need them. 

It is a great alternative to HELOC and what makes it all the more attractive is the fact that it does not require any monthly mortgage payment. 

Some of the notable features of HomeSafe® include the following: 

  • It is available for properties that are worth up to $10,000,000
  • Loan proceeds may be as high as $4,000,000
  • It offers a draw period of up to 10 years 
  • Monthly mortgage payments are not required 
  • There are no prepayment penalties attached to this plan 
  • No monthly or annual mortgage insurance premium
  • Condos valued over $500,000 do not need FHA approval that may tend to drag or not even fall through 
  • Open-end adjustable rate based on WSJ 3-month LIBOR index

Learn more about HECM vs HELOC

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The Bottomline

While there might be a limited number of reverse mortgage options, close scrutiny would make you realize that there is at least one option that is perfect for you.

And right after your scrutiny, you can go ahead and opt for one that you think is great.

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