Reverse Mortgage Options: HECM, Single-Purpose or Proprietary The most popular type of reverse mortgage is a Home Equity Conversion Mortgage, or HECM. These loans are sponsored by the government’s Federal Housing Administration (FHA) and distributed by FHA-approved private lenders .
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Single-purpose mortgages are only paid out in a one-time lump-sum advance and allow the homeowner to access only a part of their home’s equity. Certain homeowners go this route in order to finance major home repairs or pay for property tax. It’s important to know that, like reverse mortgages, single-purpose reverse mortgages are not due.
A single-purpose reverse mortgage is the least expensive option of the three types of reverse mortgages. However, it is also the most restrictive, and can’t be found everywhere. As it says in.
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Some reverse mortgages, known as single-purpose reverse mortgages, are limited to use for home repairs or property taxes only, and may be limited according to the homeowner’s income. However, the vast majority of reverse mortgages are issued at Home Equity Conversion Mortgages, or HECMs, which are awarded based on the value of the home.
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Single-Purpose Reverse Mortgages. If you find the idea of a reverse mortgage appealing, understanding exactly how the loan works and what is required of the property owner is critical. You should consider each of the four types before deciding whether one works for you.
Single purpose reverse mortgages As the name implies, these can be used for only one purpose. and that’s usually home repairs, payment of property taxes or making energy-efficiency improvements. They tend to be offered by local government agencies or nonprofit organizations and are usually available to low-income borrowers only.
Single-purpose reverse mortgages are the least expensive option. They are not available everywhere and can be used for only one purpose, which is specified by the government or nonprofit lender.
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Single-purpose reverse mortgages typically involve only a small portion of home equity, which means default is unlikely. With an HECM loan, in contrast, a borrower can obtain up to 60% of the value of his home, which significantly raises the possibility of default, and thus necessitates the HUD insurance policy.