A reverse mortgage is a mortgage loan, usually secured over a residential property, that enables the borrower to access the unencumbered value of the property. The loans are typically promoted to older homeowners and typically do not require monthly mortgage payments. Borrowers are still responsible for property taxes and homeowner’s insurance.
Reverse Mortgage Types: Lump Sum Payout -VS- Line of Credit. Using the reverse mortgage as a line of credit, anything that HUD does not let you take in the initial draw, you can take after the 1st year. So literally on day 366 and beyond the remainder of the funds are available to you on the line of credit so if you can limit yourself to the 60%,
The reverse mortgage line of credit is based on the LIBOR index and usually has a ceiling of 5% or 10% above the beginning interest rate, depending on the product chosen (and the products available) at closing.
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A great reverse mortgage idea: Take a credit line now. Reverse mortgages are called Home Equity Conversion Loans (HECMs). They’re designed to provide you with cash at a later age, to help pay your bills if your other savings run out. Normally, the smart play is to wait until your mid-70s or early 80s to take the loan.
No. A reverse mortgage line of credit is just one way to take funds. In fact, most people take their reverse mortgage loan amount in a variety of ways – sometimes determined by their own wants and needs and sometimes determined by the rules governing reverse mortgages.
The one study that I’ll mention is the one that referred to the notion that it would be good to get a reverse mortgage at age 62 with a line of credit, and and use it when their sequence of return.
The ability to have an unused line of credit grow is a valuable consideration for opening a reverse mortgage sooner rather than later. It is also a detail that creates a great deal of confusion for those first learning about reverse mortgages, perhaps because it seems this feature is almost too good to be true.