A single-purpose reverse mortgage is a type of reverse mortgage that is typically offered by state or local government agencies, nonprofit organizations, or specific lenders. It is called a “single-purpose” because it is intended to address a specific purpose or need, such as covering home repairs, property taxes, or other designated expenses. Here are some key details about single-purpose reverse mortgages:
- Purpose: Single-purpose reverse mortgages are designed to assist homeowners in meeting a specific financial need or expense. The funds obtained from the loan are limited to the designated purpose agreed upon by the lender and borrower.
- Availability: Single-purpose reverse mortgages may have more limited availability compared to other types of reverse mortgages. They are often offered by local or state government agencies, community organizations, or specific lenders that cater to a particular region or demographic.
- Eligibility: Eligibility criteria for single-purpose reverse mortgages may vary depending on the lender or program. Generally, homeowners must meet age requirements (typically 62 or older) and have sufficient home equity. Some programs may also consider income and creditworthiness.
- Loan Amount: The loan amount available through a single-purpose reverse mortgage is typically smaller compared to other types of reverse mortgages. The loan amount is based on the borrower’s home value, the designated purpose, and the lender’s guidelines.
- Repayment: Single-purpose reverse mortgages are typically structured as interest-only loans, meaning the borrower is not required to make monthly payments. The loan becomes due when the homeowner sells the home, moves out permanently, or passes away. At that point, the loan balance, including accrued interest, must be repaid.
- Costs and Fees: Single-purpose reverse mortgages generally have lower upfront costs compared to other types of reverse mortgages. However, borrowers may still incur closing costs, origination fees, and other associated fees, which can vary depending on the lender or program.
It’s important to note that single-purpose reverse mortgages may have specific terms and conditions that are unique to the lender or program offering the loan. If you are interested in a single-purpose reverse mortgage, it’s advisable to research and consult with the specific lender or organization providing the loan to understand the details, eligibility criteria, costs, and repayment terms associated with their program. Additionally, seeking guidance from a HUD-approved housing counselor can provide valuable insight and assistance in evaluating your options.