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How much money can I get with a reverse mortgage loan, and what are my payment options?
How much you can borrow depends on your age, the interest rate you get on your loan, and the value of your home. You have three main options for receiving your money: through a line of credit, monthly payout, or lump sum payout.
Your borrowing limit is called the “principal limit.” It takes into account your age, the interest rate on your loan, and the value of your home. In general, loans with older borrowers, higher-priced homes, and lower interest rates will have higher principal limits than loans with younger borrowers, lower-priced homes, and higher interest rates. If you are married or co-borrowing with another person, the principal limit is based on the age of the youngest co-borrower, or Eligible Non-Borrowing Spouse.
You have three main options for receiving your money:
Line of credit (adjustable interest rate)
Lower cost than a lump sum payment because you’ll only be paying interest and fees on the money you use.
You can use a credit line growth feature that allows you to borrow some money now and leave some credit available for the future. Whatever you don’t use in your credit line will keep growing, allowing you to borrow up to a maximum amount stated in your mortgage.
Can be combined with monthly payout.
Monthly payout (adjustable interest rate)
- Get a set monthly payout to supplement your income.
- Two choices: Term (fixed monthly payouts for a set number of years) or Tenure (fixed monthly payouts as long as you maintain the reverse mortgage and the payout does not cause the balance to exceed the amount stated in the mortgage).
- Lower cost than a lump sum payment because you’ll be paying interest and fees only on the money you’ve drawn so far.
- Can be combined with a line of credit.
Lump sum (fixed interest rate)
- Withdraw all available funds at once. Amount available may be lower compared to other payment options.
- Higher cost than a line of credit or monthly payout because you’ll be paying interest and fees on entire loan amount drawn at closing.
- No credit line growth feature.
- Higher risk for younger borrowers because the borrower may outlive loan funds.
Note: This information only applies to Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loan.
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