Elderly Parents Explain Benefits with two kinds of reverse mortgages

 The Federal Housing Administration insures two reverse mortgage types: adjustable-rate and a fixed-rate.

Fixed-rate reverse mortgages consist of a one-time lump sum payment.

 Adjustables have five payment options:

• Tenure: Set monthly payments so long as you or your eligible spouse remain in the home
• Term: Set monthly payments for a fixed period
• Line of credit: Unspecified payments when you need them, until you’ve exhausted your funds
• Modified tenure: A line of credit and set monthly payments for as long as you or your eligible spouse live in the home
• Modified term: A line of credit and set monthly payments for a fixed period of your choosing

 To apply for a reverse mortgage, you must meet the following FHA requirements:

• You’re 62 or older
• You and/or an eligible spouse — who must be named as such on the loan even if he or she is not a co-borrower — live in the home as your primary residence
• You have no delinquent federal debts
• You own your home outright or have a considerable amount of equity in it
• You attend the mandatory counseling session with a home equity conversion mortgages (HECM) counselor approved by the Department of Housing and Urban Development
• Your home meets all FHA property standards and flood requirements
• You continue paying all property taxes, homeowners insurance and other household maintenance fees as long as you live in the home

How to Turn Senior Home Equity into Tax Free Cash 

Before issuing a reverse mortgage like any home equity loan, a lender will check your credit history, verify your monthly income versus your monthly financial obligations and order an appraisal on your home.

The Consumer Financial Protection Bureau recommends waiting until you’re older to obtain a reverse mortgage so you don’t run out of money too early into retirement.

Nearly all reverse mortgages are issued as home equity conversion mortgages (HECMs), which are insured by the Federal Housing Administration. HECMs come with stringent borrowing guidelines and a loan limit.

If you think a reverse mortgage might be right for you, find an HECM counselor or call 800-569-4287 toll-free to learn more about this financing option. If you decide to apply for a reverse mortgage, you can contact an FHA-approved lender.