Using Reverse Mortgage Cash Out Options Wisely
A senior gentleman called me last Friday. He wanted to discuss reverse mortgage options, in particular he wanted to know a dollar figure we might loan on his home given it's current value.
I pulled out my supercomputer, punched in the numbers and out popped about $130,000. He said, "let's do it". So, what he wants to do with the money is take all $130,000 and put into his bank account. He'd make draws thereafter for living expenses.
Well, I had to slow him down a little here and let him know he was making a mistake. He is not an unusual reverse mortgage customer. He simply needs to supplement income for living expenses.
He owns his home outright. All he wants is some supplemental income.
He has four different cash out options to receive money from his reverse mortgage. The one he wanted was probably the worst option for his particular situation.
The 4 options are as follows:
The first is simply to do as he wants and take a large lump sum. The lender will set a maximum cash out amount. The borrower can take this amount or a portion thereof out at any time.
Number 2 is for the borrower to receive a monthly payment. The borrower may determine the amount, which may have an end date when the money runs out, or the bank may set a number which lasts in perpetuity.
A popular option is to use a reverse mortgage line of credit. In this instance the mortgage company alots a loan amount. The borrower simply leaves the alotment in the line of credit until it's needed. The benefit is no interest accues against the home while the money is in the LOC.
Something to note about the line is it actually accrues interest and grows for the borrower's benefit, while money is in the line of credit.
The fourth option is to use a combination of any of the three plans just mentioned.
In my borrowers case the line of credit option was his best choice because he didn't need a large lump sum up front. He only needed some money from time to time. Additionally, by using the line of credit is interest burden would be kept to a minimum.
It's case by case which you choose to use..
I pulled out my supercomputer, punched in the numbers and out popped about $130,000. He said, "let's do it". So, what he wants to do with the money is take all $130,000 and put into his bank account. He'd make draws thereafter for living expenses.
Well, I had to slow him down a little here and let him know he was making a mistake. He is not an unusual reverse mortgage customer. He simply needs to supplement income for living expenses.
He owns his home outright. All he wants is some supplemental income.
He has four different cash out options to receive money from his reverse mortgage. The one he wanted was probably the worst option for his particular situation.
The 4 options are as follows:
The first is simply to do as he wants and take a large lump sum. The lender will set a maximum cash out amount. The borrower can take this amount or a portion thereof out at any time.
Number 2 is for the borrower to receive a monthly payment. The borrower may determine the amount, which may have an end date when the money runs out, or the bank may set a number which lasts in perpetuity.
A popular option is to use a reverse mortgage line of credit. In this instance the mortgage company alots a loan amount. The borrower simply leaves the alotment in the line of credit until it's needed. The benefit is no interest accues against the home while the money is in the LOC.
Something to note about the line is it actually accrues interest and grows for the borrower's benefit, while money is in the line of credit.
The fourth option is to use a combination of any of the three plans just mentioned.
In my borrowers case the line of credit option was his best choice because he didn't need a large lump sum up front. He only needed some money from time to time. Additionally, by using the line of credit is interest burden would be kept to a minimum.
It's case by case which you choose to use..
posted by Debt Consolidation Loan at
7:07 PM
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