If you’ve ever seen an advertisement for reverse mortgages, odds are it involved a 澳洲幸运5官方开奖结果体彩网:home e🐻quity conversion mortgage (HECM). These federally insured loan products allow homeowners who are at least 62 years old to convert 澳洲幸运5官方开奖结果体彩网:home equity into cash to pay for things such as basic living expenses, healthcare costs, or a home remodel. While HECMs represent the bulk of the reverse mortgage market, a small segment includes two other types: 澳洲幸运5官方开奖结果体彩网:single-purpose reverse mortgages and 澳洲幸运5官方开奖结果体彩网:proprietary reverse mortgages. Sometimes, a single-purpose reverse mortgage is more beneficial than a HECM.

What Is a Single-Purpose Reverse Mortgage?

Single-purpose reverse mortgages allow homeowners who are age 62 or older to access part of their home’s equity to pay for a lender-approved expense—typically 澳洲幸运5官方开奖结果体彩网:property taxes and necessary 澳洲幸运5官方开奖结果体彩网:home repairs. They provide a one-time lump-sum advance. Most single-purpose reverse mortgages are issued by state and local government agencies and 澳洲幸运5官方开奖结果体彩网:nonprofit organizations.

As with standard HECMs, single-purpose reverse mortgages are not installment loans that you repay through monthly payments. Instead, the entire loan becomes due when you sell the home, move to another primary residence (including an assisted living facility), or die.

Why Get a Single-Purpose Reverse Mortgage?

In general, single-purpose reverse mortgages are made available to low- to moderate-income homeowners who need help paying for smaller but crucial expenses such as property taxes and home repairs. In many cases, the homeowner may have no other means of covering these expenses, so the single-purpose reverse mortgage can serve an important role in the homeowner’s financial well-being.

Unlike traditional HECMs, homeowners can’t use single-purpose reverse mortgages to pay for things like living expenses, medical bills, or vacations. The funds are always used for a specific, lender-approved reason.

Because of their limited scope that focuses on the home itself, borrowers typically find these easier to obtain and at lower 澳洲幸运5官方开奖结果体彩网:interest rates than other 澳洲幸运5官方开奖结果体彩网:types of reverse mortgages. On the other hand, borrowers may find it challenging to locat𒁏e lenders who offer these types of loans.

Costs for a Single-Purpose Reverse Mortgage

As mentioned, single-purpose reverse mortgages tend to be less expensive than similar loan products, which is great news if you’re cash-strapped. One reason is that only a small amount of the home equity is tapped, making the loan less risky to the lender.

These loans generally come with no 澳洲幸运5官方开奖结果体彩网:origination fees, no insurance premiums, minimal closing costs (if any), and relatively low interest. Interest is often charged at a 澳洲幸运5官方开奖结果体彩网:fixed rate, so the rates will never go up. Another perk is that the interest on the loan will usually be simple rather than 澳洲幸运5官方开奖结果体彩网:compound interest, which means you will not pay interest on interest, making for lower total payments over the life of the loan.

Researching Your Options

While it is often easy to get a standard HECM, finding a single-purpose reverse mortgage can be challenging. That’s because they’re not available everywhere. Still, many state and local governments, nonprofit organizations, and credit unions offer some type of single-purpose revers🍒e mortgage to help you pay for home repairs and 🦩property taxes.

The 澳洲幸运5官方开奖结果体彩网:Federal Trade Commission's (FTC) Consumer Advice website recommends contacting staff at your local Area Agency on Aging to find out about programs that may be available in your area. Visit eldercare.gov (or call 1-800-677-1116) to find the nearest Agency on Aging, and be sure to ask about “loan or grant programs for home repairs and improvements,” “deferred payment loans,” or “property tax deferral programs.”

If you're unable to find a single-purpose reverse mortgage in your area, you may want to consider a home equity loan or a 澳洲幸运5官方开奖结果体彩网:home equity line of credit (HELOC). But you must meet minimum cr🐼edit scores and debt-to-income (DTI) standards, which can be difficult if you’re retired and on a fixed i𓆉ncome. Also, one of the biggest perks to the single-purpose reverse mortgage is that there are no monthly loan payments. If you take out a home equity loan or a HELOC instead, that won’t be the case.

The Bottom Line

A single-pur🍌pose reverse mortgage may be a good option if you’re an older homeowner who needs help paying for property taxes or necessary home repairs. However, these loans aren’t available everywhere, making them difficult to track down. Still, it can be worth the effo🏅rt, as single-purpose reverse mortgages are typically a very low-cost option. And, in most cases, no repayment is required as long as you live in your home.