REVERSE MORTGAGE LINE OF CREDIT
The Reverse Mortgage “Line of Credit” is one of the most flexible loans available in the lending industry today. Giving borrowers benefits both now and in the future.
Whether you own your home free and clear or have a small mortgage to pay off, the line of credit can provide numerous benefits to you as long as you have the loan in place:
- Monthly payments to you for a fixed period; and which you may stop at any time.
- A “tenure” payment – which is a specific amount that is paid to you every month for as long as you have the loan; and regardless of the market or value of your property.
- You don’t have to take anything out of your Line of Credit; but may let it sit and grow until you really need it
- You are not required to make any monthly payments. However, some people choose to make payments so they can re-use their line of credit over and over again. The unused portion continues to grow as long as the loan is in place and regardless of the market or value of the property.
- The LOC grows according to the applied growth rate which is equal to the interest rate on your reverse mortgage plus the monthly mortgage insurance premium (1.25%) at any given time. [Growth Rate = Interest Rate + MIP (1.25%)]
- The LOC does not earn interest; since the “Growth Rate” is not tied to the property value or the fluctuation of the market. It gives the borrower future BORROWING POWER and access to more cash. Whenever a portion of the LOC is used it becomes part of the Loan Balance.The Line of Credit cannot be reduced, capped or terminated, except by the borrower (NOT THE LENDER). A Reverse Mortgage Line of Credit is due, plus any accrued interest, mortgage insurance and any property charges, when the last borrower on title (or eligible non-borrowing spouse) permanently moves out of the property or a repayment event occurs.
How does a Reverse Mortgage “Line of Credit” compare to a traditional “Equity Line” or “Home Equity Line of Credit” (HELOC)?
REVERSE MORTGAGE LINE OF CREDIT (LOC)
- No Monthly Payments Required
- LOC is not due until the last borrower on title permanently moves out of the home, or a *repayment event occurs
- Cannot be capped or closed by lender
- Growth Feature – The unused portion of the LOC gets larger over time; allowing borrower to access more cash in the future
A repayment event can occur if borrower fails to pay the property taxes, hazard insurance, or does not properly maintain the property. The lender can require that the loan be paid in full.
EQUITY LINE or HELOC
- Payments of interest only required during the “draw” period
- Principle and interest payable during the “pay back” period
- Limited number of years in the loan term
- Banks have been known to reduce, cap or close Equity Lines/HELOCs (i.e., the mortgage meltdown period)
Why Get a Reverse Mortgage Line Of Credit When My House Is Free And Clear?
The simple answer is that you might lose out on the line of credit growth that could be useful in years to come. The best part is that the growing line of credit does not cost you anything until you use it; at that time it does become part of your loan balance which you pay off when the time comes.
This chart shows two people that got a Reverse Mortgage Line of Credit at the earliest time they could – age 62. Notice how each person would have access to a great deal of cash in the future by starting their reverse mortgage early. One borrower (blue) got a $750 monthly payment from his reverse mortgage along with his LOC (this reduced the LOC starting figure in comparison to the other person.) The other borrower (red) took no monthly payments but put all funds available into the LOC for the future.
Find out how much cash you might have available in a Reverse Mortgage Line of Credit that keeps growing until you need it!
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If you live in Southern California, in-home appointments are available.