Tips and explanations of your options for receiving money from a reverse mortgage
Reverse mortgages often seem like financially sound investments. These mortgages allow senior citizens to receive a monthly payment from their lender for as long as they continue to occupy the home. There are several payment options that program participants may take advantage of. It is important to remember that no matter how the loan is paid to the homeowner, she or her heirs must pay it back immediately should the homeowner die or move off the property.
THE TRADITIONAL REVERSE MORTGAGE
The most common payment option for a reverse mortgage is the tenure payment plan. Under this plan, the homeowner receives a monthly sum of money for as long as he remains in the home. If the homeowner remains in the home for long enough, she will receive payments in excess of the home’s value. This type of mortgage is very attractive to many senior citizens because they live on a fixed income.
THE TERM PAYMENT PLAN
The term payment plan is very similar to the tenure payment plan. However, under this plan, homeowners only receive money for a fixed period of time. This plan allows seniors to receive a larger sum of money each month for they would under the tenure payment plan. It is ideal for those who plan to move in the future, as they will owe less money.
THE LUMP SUM PAYMENT PLAN
Under this plan, homeowners receive one payment at the time of closing. This allows them to receive the entire reverse mortgage at once. This plan makes sense for those who need a large sum of money to pay off other debts or to purchase a second home.
CREDIT LINE PLAN
Reverse mortgage credit lines work similarly to traditional credit lines; however, there is no pre-approval process. The homeowner does not receive money on a regular basis, but can request money from their reverse mortgage credit line as needed. Participants in this plan end up owing less money because they only take out a loan when they need it. This plan can be converted to a monthly payment plan should the need arise.
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