The third type of reverse mortgage is the proprietary reverse mortgages, which are issued by private lenders and are only backed by the companies issuing them.  Like all of the other reverse mortgages, you must live in your own home, and the loans are generally tax-free.

It is recommended that you speak with your tax professional before you decide.  Typically these mortgages do not affect Social Security or Medicare benefits.  You can also remain living in the home, retain title and do not have to pay back the loan until the last surviving borrower dies, sells the home or no longer lives in the home as a principal residence.

The HECM is popular because the borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.  Since interest accrues on the loan, be sure your loan includes a “nonrecourse” clause that will prevent either the borrower or the estate of the barrower from owing more money than the house is worth. 

Lenders may vary in their origination fees and other closing costs.  There could also be a service fee over the term of the mortgage.  You may also have the option between a fixed rate and a variable rate mortgage.  According to the Reverse Mortgage Rate Times, HECM Reverse Mortgages interest rates do not vary from one lender to another. This makes it easier to look for a mortgage.

If either the taxes or the homeowners insurance is not paid the loan may become due and payable. This clause will protect the lender if you fail to make payments on property taxes and insurance.  

All Reverse Mortgage Loan Specialists are required to be approved by HUD (Department of Housing and Urban Development). The barrower is still responsible for the property taxes.  You may want to find a specialist that is a member of an association committed to ethics, like the National Reverse Mortgage Lenders Association (NRMLA). This organization was created to protect seniors from predatory lending practices. These individuals are most likely to be dedicated to fair, objective and honest dealings with the senior market and their advisors.

Always shop around for the best deal for you.  You may want to find a lender who is committed to the highest standard of consumer information and who can provide analyses and comparisons that meet AARP’s model specifications.  AARP provides a program that prints out a side by side comparison of mortgage products.  Like anything else, it pays to weigh you options before you decide.