Understanding the Different Types of Reverse Mortgages
You may wonder where to acquire an extra income source to supplement your savings as you approach retirement age. Could the perfect solution be a reverse mortgage?
Read on as Altitude Home Loans’ mortgage lenders in Tucson, AZ, outline the primary types of reverse mortgages you could add to your portfolio.
How a Reverse Mortgage Differs From a Typical One
You take out a regular mortgage when you first purchase your home. If so, the lender immediately pays for the bulk of the property price after you’ve made the required down payment.
When you take out a reverse mortgage, you receive a loan in exchange for home equity. Most people qualify for a reverse mortgage after they turn 62 and don’t have to pay it back until they move out of the property or pass away. Still, there are a few caveats, like owing the lump sum plus interest because you don’t pay the loan back in installments.
What Types of Reverse Mortgages Should You Research?
Are one of these reverse mortgage types a sufficient solution to pad your income? Learn more about the different types of reverse mortgages detailed below.
Home Equity Conversion
You might qualify for a home equity conversion mortgage if you have quite a limited income. You can use that money for anything, from paying off vehicles to medical bills. The main downside is that HECMs have steep upfront costs, so you’ll need hefty funding options.
Single-Purpose Reverse
Why not apply for a single-purpose reverse mortgage through local or state government programs or nonprofit organizations? This mortgage type protects the lender’s interests via lower interest rates for the borrower. You can also only use the loan for a specific, agreed-upon purpose.
Proprietary Reverse
Only a private lender will supply a proprietary reverse mortgage. You might prefer this loan if you own a high-value property backed by a professional appraiser or if you don’t qualify for an HCEM. Some lenders refer to this particular reverse mortgage as a jumbo reverse mortgage since it is a high-end deal.
Fixed Versus Adjustable Rates for Reverse Mortgages
If you take out any type of reverse mortgage, you’ll find it falls under one of these two categories:
Adjustable Rate
An adjustable-rate reverse mortgage has shifting interest rates. You might incur a low rate one month but then notice an increase the next. The upside is flexibility, particularly with how you draw from and use this loan.
It’s a fantastic option for long-term retirement planning.
Fixed Rate
A fixed-rate reverse mortgage is the opposite – its monthly repayment rate doesn’t change. The interest rates you’ll pay are the same over the entire loan period.
You might prefer this with a steady, predictable budget or payment plan.
Purchasing a Home in Tucson, Arizona? Contact Altitude Home Loans
The final question is, “Which types of reverse mortgages will work best for your current financial situation?” Altitude Home Loans can help you find out and answer questions, like what happens after skipping a mortgage payment.
If you’re on the hunt for your dream home in Tucson, Arizona, get in touch with our competent loan officers at 520-500-1010!