Over the past few years, there have been many changes to reverse mortgages.
Each reverse mortgage has distinct features. These features have the opportunity to meet your needs. Proprietary reverse mortgages are free of FHA mortgage insurance. Fixed-rate reverse mortgages give borrowers a lump sum of cash at closing. The HECM adjustable rate program is now based on the CMT index. The adjustable-rate reverse mortgage gives you the opportunity to build a customized payment plan to meet your cash needs.
You can elect to take the funds from the loan in many different ways. If you need more monthly cash you can select a monthly payment for life (tenure payment). You may also set payment for a specific number of payments (term payment). If you do not need the funds monthly you can choose a line of credit. You have the funds available to tap into you need them. The unused funds in your line of credit actually grow over time increasing the funds available for future use.
Your credit line grows at the same rate as your loan rate + 1/2% (HECM). Unused, it grows larger over time. You can put money into your credit line or take it out. It remains open as long as you have a balance. If you put money in (make a payment on your loan), your credit line will grow dollar for dollar.
There is also the option for you to have the best of both worlds. You can receive a monthly check plus a line of credit. This option might be attractive as most everyone has unexpected expenses so having a line of credit can be comforting. Many borrowers use it to pay their annual taxes and homeowners insurance.
One of the great features of the adjustable-rate program is your ability to change the payment plan at the time. We all know that life-changing events take place all the time.
The key to knowing which reverse mortgage program to choose from is to know what your needs are. Once you know that, a reverse mortgage can be customized to meet your cash flow needs.
If you have a reverse mortgage question, call me at (949) 267-3409. I’m happy to help you.
