If you’re a senior with enough home equity, you could be sitting an opportunity to leverage your residence for extra cash. This is done through a reverse mortgage. While some of these loans tend to be more well-known, there is a type of reverse mortgage that tends to fly under the radar. A proprietary reverse mortgage offers a combination of autonomy and freedom that other loan types don’t.  Let’s dive into everything you need to know to decide if a proprietary reverse mortgage is right for you. 

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What is a Proprietary Reverse Mortgage? 

A proprietary reverse mortgage is like other types of reverse mortgages in that it is a loan that converts your home’s equity into cash. However, what makes a proprietary reverse mortgage unique is that it is offered and insured through private lenders. Because of this, the loan isn’t restricted by Federal Housing Administration (FHA) lending limits, meaning you can access more funds without paying upfront fees; hence, they’re often referred to as jumbo reverse mortgage loans. 

How Does a Proprietary Reverse Mortgage Work? 

To qualify for a proprietary reverse mortgage, you must be at least 62 years old, and your main residence must have enough home equity established to meet the lenders requirements. Once you’ve successfully acquired a loan, it will first pay off your current mortgage. Any remaining proceeds are then provided to you in a non-taxable lump sum, which you have the freedom to use on anything. 

What are the Benefits of a Proprietary Reverse Mortgage?

There are a few different types of reverse mortgages available to homeowners, meaning choosing the best option for you can be confusing. Establishing what benefits most align with your wants and needs can make the decision clearer. Here are the advantages you can expect with a proprietary reverse mortgage: 

A Greater Amount of Funds: Proprietary reverse mortgages aren’t restricted by FHA lending limits, meaning you can receive larger loan amounts compared to other reverse mortgages.  

No Strict Guidelines for How You Use It: Unlike a single-purpose reverse mortgage, proprietary reverse mortgages give you the freedom to use funds from your loan however you wish. This means your payments can go toward home renovations, paying off student debt, medical bills, living expenses, travel, and more.  

Freedom From Upfront and Monthly Mortgage Payments: Other types of reverse mortgages typically charge an upfront mortgage fee, but this option avoids this issue. Instead of paying the 2% fee on a HECM loan for a $400,000 home, a proprietary reverse mortgage allows you to save $8,000 you would otherwise lose. Additionally, this loan pays off your existing mortgage and does not require you to make monthly payments on it until it comes due. Just make sure to continue to pay financial obligations such as property taxes and homeowners insurance.   

A Proprietary Reverse Mortgage is in your Reach

With proprietary reverse mortgages, the options are limitless. Not constrained by FHA limitations, flexible in how it’s used and lenient on mortgage payment requirements, this loan is a wonderful option for many homeowners over the age of 62 looking for extra income.  

Interested in learning more about these loans and more? Millennial Title is well versed in various reverse mortgage options. Contact the team at Millennial Title and get help finding a solution that’s right for you. 

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