Part of the reverse mortgage process is choosing from several different ways to receive your funds. Here are the ways in which you can take reverse mortgage proceeds:
Lump-Sum Distribution: This is by far the most popular choice for our clients. You take all of your funds at once, and you can use the funds for whatever you like, whenever you want. Note, if you want a fixed rate rather than a variable interest rate, this is your only choice.
Line of Credit: Some reverse mortgage borrowers want the security of being able to access money if they need, but have no immediate expenses to pay. These homeowners may choose to set up a line of credit to utilize whenever they choose. Cool feature – if your home’s value increases, your line of available credit usually grows also.
Term Payments: This is just like a mortgage payment, except the payment is made to you. You can choose to receive monthly payments for a specified time. For example, some of our clients choose to receive monthly payments starting at age 62 for eight years, and then elect to begin receiving Social Security payments at age 70. Insider tip - limiting your payments to a certain number of years increased the amount you can receive every month.
Tenure Payments: In option, you get monthly payments for as long as you live in your home. Because no one – including the lender – can predict exactly how long that will be, your monthly payments are considerably less than term payments would be. But some borrowers like the security of knowing that they’ll receive a payment as long as they are in their homes. You can even combine some of these ways of taking proceeds – for example, choosing a partial upfront lump sum in addition to a line of credit.
Regardless of how you use a reverse mortgage, one thing is always guaranteed – you still own the home, and any unused equity belongs to you and your heirs.
Author: Rick Underwood
Date: 9/13/19
A division of The Underwood Group BRE # 01396133 | NMLS # 344822 Disclaimer
