The Home Equity Conversion Mortgage is a financial tool that is both versatile and flexible, allowing the homeowner to change the ways funds are dispersed as their needs may change over the years. The following will outline which option are available to you.
Your option with a fixed rate HECM reverse mortgage is a single lump sum disbursement at closing.
You have several options with an adjustable rate HECM reverse mortgage, they are:
- Tenure– equal monthly payments as long as at least one borrower lives and continues to occupy the property as a principal residence.
- Term– equal monthly payments for a fixed period of months selected.
- Line of Credit– unscheduled payments or in installments, at times and in an amount of your choosing until the line of credit is exhausted.
- Modified Tenure– combination of line of credit and scheduled monthly payments for as long as you remain in the home.
- Modified Term– combination of line of credit plus monthly payments for a fixed period of months selected by the borrower.
Getting the money and knowing what to do with are two different things…this should help
A Single Cash Disbursement would be good for homeowners who:
- Want to eliminate mortgage payments or some other short term debt.
- Want to purchase a house or other financial assets. For instance, the homeowner may have just sold a property and is now liquid, instead of using all that liquidity up on another purchase, they could use a reverse mortgage for said purchase and still stay liquid with a portion of what they had before.
Utilization of a Credit Line would be good for homeowners who:
- Want to have a little extra available for life’s unexpected things, or weddings, birthdays, etc.
- Need to make up for loss of income due to a spouse’s death.
- Want to even out their income if they’re in a situation where income is seasonal or whatever other situation where their income may rise and fall irregularly.
A Modified Tenure agreement would be in order for homeowners who want to increase their monthly income and not have to sell their house.
A Modified Term would do for homeowners who need to increase funds for a limited period of time, say to fill the gap between now and another income source might kick in.