The two most important factors that distinguish the FHA-insured reverse mortgage from other reverse mortgages are tenure borrowing (lifetime income) and the increase in the amount to be borrowed. Unlike most other reverse mortgages, the HECM increases the amount available to the borrower. This is based on a rising real estate market. Check with your counselor for the current policy.
Example: If you are originally qualified to receive a mortgage amount of $100,000, that amount will increase each year. Let’s use a hypothetical rate of increase of 6%. You would have $106,000 available one year after the original qualification if no money was used.
If you chose a credit-line account and withdrew $6,000 at the end of each year, the original $100,000 would always be available. With other reverse mortgages, a withdrawal of $6,000 per year would simply reduce the amount available to $94,000, $88,000, $82,000, and so on.
The major disadvantage of the HECM is the amount of money that can be borrowed. If your home is worth much more than the FHA limit in your area and you want to borrow the most you possibly can, you will want to investigate other reverse mortgage options. There are several companies that offer reverse mortgage loans well beyond the limits of the HECM. These loans are generally more expensive and some do not allow lifetime payments.
A good place to start is the AARP website at www.aarp.org. AARP will take the information for your specific situation and give you a comparison of the costs involved in the available programs. It has nothing to sell you, so the information is unbiased.
Many major banks also have websites that offer help. There is no shortage of companies wanting to get you a reverse mortgage loan. As with any loan that you want, some shopping around will give you a better idea of what is available that best suits your needs.