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Types of Reverse Mortgages

There are 3 basic types of Reverse Mortgages with some variations on the same theme.

Type 1: The FHA/HUD Insured Reverse Mortgage.

90% of all Reverse Mortgages are granted using this plan. A vast majority of that 90% are funded using the "HUD Monthly" Plan. The HUD "HUD Annual Plan has an interest rate that floats 1.50% above the One Year Treasury Index. The annual Plan floats 3.10% above the same index. The lower interest rate means a higher benefit for the Senior so the Monthly Plan is by far the most popular. Both these options are Federally Insured thru FHA and the Department of Housing and Urban Development.

Type 2: The Fannie Mae "Homekeeper".

This program is similar to the HUD/FHA Annual plan. It does have lower closing costs that the HUD/FHA programs and slightly higher loan limits. There is no Credit Line Growth Rate as there is with the HUD/FHA options. The "Homekeeper" accounts for a very small number of the total Reverse Mortgages granted. In rare cases older Seniors in some lower cost areas might benefit from this program.

Type 3: The Jumbo Cash Accounts

These are a relatively new entry into the Reverse Mortgage arena. This is an institutionally funded Reverse Mortgage intended for use by Seniors with expensive properties ($750,000.00) and up in value. The program is available in three variations: Standard, "0" Point" and Zero Cost. The effective rate of interest is higher than either the Fannie Mae Homekeeper or either of the HUD/FHA varieties. While the minimum age is 62 for this program it really does not become a viable alternative until 75 or older with some rare exceptions. The program is the same for all three varieties. The difference is in the Benefit Payout options and the closing costs. The "Cash Accounts" are designed to encourage the Senior to take a substantial cash advance at closing. There is no provision for guaranteed Monthly income. A line of credit is possible with preset monthly disbursements.