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A particularly useful option for reverse mortgages is a flexible HECM that provides a line of credit that grows over time. The credit line grows at a rate equal to the current interest rate on the loan plus 0.5%. The credit is available at any time, and can be taken out in any given amount. Some reverse mortgages allow limited use of the money but this line of credit can be used for any purpose.
With the HECM the borrower can choose their cash to be received in one of three ways, including in a single lump sum, as a monthly payment made to you over a specified amount of time or as long as you live in the home, or a line of credit for a specific amount.
The line of credit reverse mortgage option is not available in a fixed rate reverse mortgage
option, but it is available in an adjustable rate. In a fixed rate reverse mortgage, the funds are only offered in a lump sum at the beginning of the loan. The fixed-rate is a great option if the homeowner needs all the funds at once, such as to pay off an existing mortgage or for a particular home repair, but not if they want to be able to access the funds over time. The credit line gives the borrowers the option of taking as much money as they wish at initial funding, and the remaining funds as needed.
There is an increased HUD insurance for the higher loan amount for reverse mortgage benefits received from the HECM reverse mortgage, but this slight difference is minimal compared to the benefit of having a stable and dependable line of credit.
One of the great characteristics to the line of credit option is that the funds do not accrue interest when they are not being used, so borrowers who do not have an immediate need for funds will not be penalized. Also, the HECM line of credit cannot be frozen if there is money available because the borrower will have already paid their federal mortgage insurance.
With FHA Home Equity Conversion Mortgage (HECM), the loan amount is based upon the age of the homeowner and the value of the home. HUD regulates the amount of each individual loan and they limit the maximum amounts allowed according to the area of the country. With a HECM, the HUD reverse mortgage
is insured by the government that all obligations be met by the lender. The credit line option allows borrowers a lot of freedom when planning their finances. The borrower may take out as much cash as they need of the loan funds, at any time that they want them.
If you would like an information packet or would like to set up an appointment with one of our Reverse Mortgage Specialists, Please call (866) 683-3690 or view our online Reverse Mortgage FAQ’s.
Tags: HECM line of credit, home equity loan line of credit, reverse mortgage line of credit option, Reverse Mortgage Line of Credit that Grows, reverse mortgage loans fha
