Today, many seniors are realizing that their Social Security and retirement savings will not be enough to cover their needs and wants in their later years. For many older Americans, reverse mortgages are the way to greater financial security. This type of mortgage lets seniors 62 and older borrow money against their home equity. There are three types of reverse mortgages—single-use, HECM, and proprietary. Here is a closer look at proprietary reverse mortgages.
Proprietary Reverse Mortgages Defined
Proprietary reverse mortgages are private loans that let you convert your home’s equity into cash. Private loans are not government-backed—private mortgage lenders are the ones who offer and insure them. Also, they aren’t bound by the limits set by the Federal Housing Administration (FHA). Since they can loan more than the federal limit allows, you can consider them jumbo reverse mortgages.
The Difference between Proprietary and HECM
HECM is government-insured, unlike proprietary reverse mortgages. However, both types let you borrow against your home equity. The FHFA or Federal Housing Finance Agency is responsible for insuring the HECM, so it has loan limits and guidelines that protect borrowers. For example, the maximum claim amount for 2021 is $822,375, which means this is the highest home value you can use to calculate reverse mortgage proceeds. If your home is valued at $1,300,000, you won’t be able to use that figure to calculate the amount of money you’ll receive.
With proprietary reverse mortgages, you can use your home’s total value. Keep in mind, though, that home value is only one factor, and there are others that your lender could use when determining the final amount you will get. Besides having loan limits and guidelines, the HECM also requires borrowers to undergo financial assessment and reverse mortgage counseling. The counseling session ensures that the borrower knows their financial obligations and any alternative options.
Who Can Apply for Proprietary Reverse Mortgages?
You need to be 62 or older to qualify for a proprietary reverse mortgage. In addition, you should have enough equity and use the home as your primary residence. You can either own the home entirely or have an existing mortgage on it. If you are a homeowner whose primary residence is valued at over $822,375 and want to maximize the proceeds you’ll get, proprietary reverse mortgages are the best choice.
Should You Get a Proprietary Reverse Mortgage?
If you want to apply for this type of mortgage, keep in mind the general qualification requirements. Besides these, you need to ensure that you can keep paying your property taxes, homeowners insurance, and any maintenance needs your home has. Speak with a broker who specializes in reverse mortgages to see what your options are. Also, if you’re considering this type of mortgage, you should find the mortgage lender with the best rates and lowest fees. Lenders of private loans have more say in qualification requirements and loan terms, so a bit of shopping around should give you a variety of options.
Home Buying Experts: New Frontier Financial
Proprietary reverse mortgages are one of three types of reverse mortgage loans. This type lets you access home equity and use the money for anything you need. A proprietary mortgage loan is not government-insured, so that you would get more proceeds from it than from other types. You also don’t have to pay upfront mortgage fees with proprietary reverse mortgages. New Frontier Financial will help you find your forever home. We are Dallas mortgage brokers with more than 20 years of experience providing mortgage services in the city. Ask for your free mortgage rate quote or contact us today at (469) 886-8300 for information!