When Reverse loans initially were offered the public, there was only one that a Senior could select. And it was the FHA Home Equity Conversion Mortgage, otherwise known at the HECM. It's a great loan and has continued to be the most popular Reverse mortgage. At first when it came out, there was only one variation to choose from and it had a 2.00% margin tied to the 1-Year T-Bill. Eventually that margin was reduced by a half of a percent, making the overall initial interest rate lower and then at a later time, the Libor index was also as another option instead of the 1 Year T-Bill.
For senior homeowners a reverse mortgage is a very helpful option. This kind of loan option gives the senior citizens of the age above 60 years to utilize the equity and henceforth use it to supplement an existing income. Reverse mortgage loan is a sort of loan advance. The home in which the borrower resides must have an equity. And till the borrower occupies that particular house he is not required to repay the loan.
There are 2 distinct categories of reverse mortgage loans. A jumbo reverse mortgage loan is also known as the non-conforming mortgage. The other category of reverse mortgage is known as the FHA conforming mortgage loan. A jumbo reverse mortgage is issued only when the value of the property or the residential house crosses the conventional limit of an FHA conforming loan. The value restriction of a jumbo reverse mortgage is not same as an FHA reverse mortgage. Thus a loan provider can offer a higher value to a senior citizen when the value of his house increases than the usual conforming limit.
FHA conforming loan is also known as Home Equity Conversion Mortgage. Generally most of the countries have fixed $ 362,790 as the maximum limit of issuing conforming mortgage to a borrower. When this limit is exceeded, one is entitled to apply for a jumbo reverse mortgage loan.
There are a number of benefits of jumbo reverse mortgage loan. If a senior citizen's house is valued with high equity then it can be transformed to tax free cash. Once a person's house becomes eligible for reverse mortgage, he does not have to make monthly payments. When a person moves or sells his house, the reverse mortgage is repaid by his home equity. The more the value of a home goes up the more the amount for jumbo reverse mortgage is offered by jumbo reverse mortgage lender.
Reverse mortgage providers also issue reverse mortgage and jumbo mortgage. The value for conforming loan is usually fixed to $ 362,790. A jumbo reverse mortgage loan is valid when this fixed rate is exceeded.