There are two basic types of reverse mortgages. A Home Equity Conversion Mortgage or HECM which is backed by The Federal government’s Housing and Urban Development organization. Or a privately backed Reverse mortgage, in today’s market these are known as jumbo loans.
A fixed product is one where the interest rate is fixed for the life of the loan. This loan allows for a single draw of cash or payoff of an existing mortgage. It typically maximizes the amount of immediate cash available at closing. There is no monthly draw or future draw options.
Variable refers to the interest rate on this loan. It will vary monthly over the life of the loan moving up and down with the markets. It does offer a significant amount of flexibility for the client.
Monthly income either for a specific time period, or for as long as the client lives in the home.
Lump sum cash at closing or at some future date
There is a maximum and minimum cap on the interest rate
The interest rate on this loan adjusts but only once a year. It offers the same advantages as the variable, but with lower maximum interest rates.
There is a growth feature that allows the available cash available to the client to grow over time.
Currently this loan typically has lower closing costs.
A jumbo Reverse Mortgage is for clients whose home is worth over $1M and may need a larger loan amount than allowed under the HECM program.