The most popular reverse mortgage option is an FHA (Federal Housing Administration) loan. This is for homes appraised at a value of $970,800 or less. You can choose to receive a lump sum or a line of credit.
Sometimes referred to as a proprietary loan, this option is not FHA-insured and typically for homes that are worth up to $10 million. You can choose to receive a lump sum or a line of credit.
Your interest rate is fixed; however, you have access to less of your home’s equity—typically 60 percent. Also, an FHA-insured loan imposes a first-year draw limit, which is applied to the LOC and fixed rate.
Your interest rate may vary; however, you typically have access to more of your home’s equity because you’re not tapping into your funds every month, but, rather, reserving them for future expenses. The longer funds go unused, the more the principal grows.
If rates drop and your home's value increases—or you want to add your spouse to the loan—you may be able to refinance your reverse mortgage to unlock additional equity; however, you can refinance no sooner than 12 months from when you closed on your original loan.
You may be able to use a reverse mortgage to purchase a new home as long as your loan documents state that you intend to occupy the new home within 60 days of closing.