Reverse home mortgages aid seniors over 62 take advantage of the equity in their homes that has been created over the time they have been in the home. It can help seniors because it can be used as a type of second mortgage. In a reverse mortgage, the owner doesn’t ever need to pay back the loan for as long as the owner stays living in the house. It basically works as a loan on the present equity.

The homeowner can never be thrown out of the home for lack of payment since there is no money to pay back. It is a good type of loan for seniors with a decreasing income but who would like to stay in the homes they have had for a long time The owner can choose to access the money in one of three ways: a credit line, a one-time payment or a regular monthly payment.

As a senior citizen, you can choose among one of three types of reverse home mortgages: a single purpose reverse home loan, a federally backed reverse home mortgage or a privately issued reverse mortgage.

Single Purpose Reverse Home Loan

A single purpose reverse mortgage is offered by Government agencies and non-profit organizations. It’s the most inexpensive of the three types of reverse mortgages. The problem with this type is that they are harder to qualify for and the owner must have a small income. It also requires that the funds from the loan are used for a specific purpose (improvements, repairs or property taxes.)

Federally Insured Reverse Home Mortgage

The HUD (U.S. Department of Housing and Urban Development) insures this reverse mortgage. This kind of reverse mortgage is also known as a Home Equity Conversion Mortgage (HECM.) It is a loan slightly more expensive than the single purpose one.

The biggest difference is that you can use the money for whatever reason you want. It is also an easier loan to qualify for and it’s available all over the country. This type of reverse mortgage is by far the most popular of the three.

Private Reverse Mortgage

This type of mortgage is provided by a private company who hasn’t been approved to issue a Federally Insured Reverse Mortgage. In general, they have the same type of requirements than a regular reverse mortgage.

The biggest problem with this type of loan is that it can be very expensive. Since private companies offering this type of loan do not need to comply with federal regulations, some companies take advantage of it by charging excessive fees to unsuspected seniors.