A distribution generally refers to the disbursement of assets from a fund, account. Mutual fund distributions consist of net capital gains made from the profitable sale of portfolio assets, along with dividend income and interest earned by those assets. Reverse mortgages offer a flexible set of distribution options where loan proceeds can be received in any combination of the following options:
• Line of credit – draw as needed up to the maximum eligible amount
• Lump sum – a lump sum of cash at closing (only available on fixed-rate loans)
• Tenure – monthly payments for the life of the loan
• Term – monthly payments for a specific number of years
Borrowers may access the greater of 60 percent of the principal limit amount or all mandatory obligations, as defined by the HECM requirements, plus an additional 10% during the first 12 months after loan closing. The combined total of mandatory obligations plus 10% cannot exceed the principal limit amount established at loan closing. The borrower may also need to set aside additional funds from the loan proceeds to pay for taxes and insurance.
Have more questions? Give us a call at 805-738-8326. We’re here to answer questions and talk you through the process.
Author: Stephanie Duenas
Written: 8/20/19
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