The Different Types of Reverse Mortgages and How to Choose a Reverse Mortgage Lender

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The Different Types of Reverse Mortgages and How to Choose a Reverse Mortgage Lender


Many people are concerned about the costs associated with a Reverse Mortgage. However, if you want or need equity from your home, are not willing to relocate to a smaller home, don’t want to or are unable to face regular loan payments and are comfortable reducing the size of your estate left to your heirs, then the upfront costs of a Reverse Mortgage should not be a significant issue.
Reverse Mortgage fees are generally only a disadvantage if you intend on moving out of the house in a short period of time. And while Reverse Mortgage interest rates can be high, the fees and interest are not a burden to the homeowner since they are usually financed by the Reverse Mortgage itself (so there are not any out of pocket expenses).
But, no matter how you justify them, Reverse Mortgage costs do indeed amount to a significant sum and so in this article we will help you to understand:
To help explain these details we have created an example of a fairly typical Reverse Mortgage loan. This example shows the Reverse Mortgage loan amounts, charges and interest rates for a 70 year old retiree , with a $200,000 house, and a $50,000 mortgage.
After reviewing this article, use the Reverse Mortgage Calculator to see how much money you could receive from a Reverse Mortgage on your own home.
There is currently only one Reverse Mortgage type that is widely available – the HECM Reverse Mortgage. This loan can be used to purchase a home or on your existing home. Depending on how you take your loan amount, you can opt for either a fixed rate Reverse Mortgage or a variable rate Reverse Mortgage.
The HUD HECM programs are available from HUD approved lenders. These lenders must adhere to the rules and regulations structured by Congress. The maximum fees and lending limits for the HECM are set by law.

How the HECM Reverse Mortgage Calculates Loan Amounts

A HUD-approved lender will determine your actual loan amount by using:
  • The loan limit (also known as the lending limit) A lending limit is the maximum Reverse Mortgage loan amount that any home would qualify for.
  • The value of your home – as determined by an appraisal
  • Prevailing interest rates
  • The amount of any outstanding loans against your house
  • Your age

Since early 2009, the HECM loan limit nationwide is set at $625,500. As the HECM Reverse Mortgage program is administered by the Department of Housing & Urban Development, legislation may increase (or decrease) this amount in the future.

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