Proprietary Reverse Mortgages
Proprietary Reverse Mortgages
What are Proprietary Reverse Mortgages?
Proprietary reverse mortgages are loan programs offered by specific lenders and they are not FHA-insured. They are not bound by county lending limits or standard FHA requirements but do have their own set of qualifications that differ from the FHA-insured HECM program. As a non-recourse loan with no required monthly mortgage payments, a proprietary reverse mortgage carries some of the same features as a standard HECM.
Proprietary vs. HECM
Proprietary reverse mortgages are designed to suit people in a variety of situations. Some want more cash out than the HECM can provide, some have a home valued over the county lending limits, while others just want to avoid the FHA insurance of the standard HECM. A proprietary reverse mortgage may be right for you but not all brokerages offer proprietary reverse mortgages or have a multitude of programs from which to choose.
Contact us to request a complimentary, no-obligation consult with one of our specialists.
Proprietary
- Low upfront costs
- Easier income qualification
- Loan amounts up to $4 million
- No mortgage insurance premium
- Structured and insured by private lenders
- Loan amount based on the lender
- Proceeds can be used for anything
- Loan proceeds are non-taxable
- Funds are usually available in one lump sum
- No penalties for prepayment
- Minimum age 55 in most states.
HECM
- Lower loan amounts
- Loan limit up to $1,089,300
- Insured by the Federal Housing Administration
- Loan amount based on a variety of factors, including age of the youngest borrower, home value, and current interest rates
- Money can be used for anything
- Funds can be disbursed in multiple ways – tenure, term, modified term, line of credit
- Loan proceeds are non-taxable
- No penalties for prepayment
- Minimum age 62
What is a Jumbo Reverse Mortgage?
A Jumbo reverse mortgage is a proprietary reverse mortgage for loan amounts over $1,089,300. This limit is set by the U.S. Department of Housing and Urban Development (HUD). Jumbo reverse mortgages can have lower closing costs while offering larger payout options. Jumbo reverse mortgages are proprietary loans, but not all proprietary loans are jumbos.
Frequently Asked Questions
When is a proprietary reverse mortgage better than a HECM?
A proprietary reverse mortgage is better than a HECM when the homeowner is younger than 62, wants to access more home equity than the FHA will allow with a standard HECM, or they desires a loan with lower closing costs.
What can you do with a proprietary reverse mortgage?
A proprietary reverse mortgage can give you the funds you need for anything you want. The loan converts your home equity to cash or a line of credit (in some states) and you can do anything you want with the funds with no monthly mortgage payments. Pay off debt, go on vacation, save for the future, buy an investment or vacation property, start a business, or give your kids and grandkids an early inheritance; the possibilities are endless… what can you imagine doing with the extra cash?
Is there mortgage insurance on a proprietary reverse mortgage?
No. These loans are not federally insured, therefore there are no monthly mortgage insurance premiums.
Do proprietary reverse mortgages have higher closing costs than a HECM?
Generally, no. Without mortgage insurance, the closing costs stay lower.
Do proprietary reverse mortgages have higher interest rates than a HECM?
Yes. Proprietary reverse mortgages usually have higher interest rates than HECM.
Are proprietary reverse mortgages adjustable or fixed rates?
There are adjustable and fixed options with proprietary loans. We can help you decide which is optimal for your needs.
Do proprietary reverse mortgages offer a line of credit?
In some states. We do reverse mortgages in Oregon, Washington, Idaho, and California and currently, Washington does not allow for proprietary reverse mortgage lines of credit, but there are options in our other states.
Do I still own my home with a proprietary reverse mortgage?
Yes. You retain the title to your home.
What happens after I die with a proprietary reverse mortgage?
When someone with a reverse mortgage dies or leaves the home for more than a 12-month period, the loan becomes due. This is called a maturity event. When a maturity event is triggered (by the death or vacancy of the homeowner) the loan servicing company will need to be contacted and they will have a process that needs to be followed by the executor of the estate in order to fulfill the loan obligations. Each month the client will receive a monthly mortgage statement in the mail from the loan servicing company that explains the loan balance and details. The contact information for the servicing company can be found in this piece of mail. It is a good idea to put your next of kin or estate executor on file with the servicing company in advance so they can communicate with them on your behalf without any additional authorization.
Work With Northwest Reverse Mortgage
At Northwest Reverse Mortgage, we maintain a robust offering of loan products and lender options to find you the program that fits your situation the best. We are always seeking out new programs and gathering information on everything available. Our proprietary loan programs currently include:
- HomeSafe Program
- HomeSafe Second Program
- Platinum Program
Pros and Cons of a Proprietary Reverse Mortgage
As with any financial decision, there are pros and cons to taking out a proprietary reverse mortgage. Northwest Reverse Mortgage helps you understand all aspects of this process to ensure you make the best decision for your needs.
Pros
- No more monthly mortgage payments
- Funds can be used for anything
- Home title remains in your name
- Can buy a new home or refinance
- Non Recourse
Cons
- Funds are usually available in one lump sum but there are line of credit products available in some states.
- Could potentially impact needs-based programs
- Higher rates than a traditional HECM (but no MIP)
Wondering how much you may qualify for, or whether this program is a fit for you? Call us today at 503-427-1667 or fill out the form on this page to request a complimentary, no-obligation consult with one of our specialists.
