Every person in life has unique needs, so it goes with the different payment options available with a reverse mortgage. Some individuals prefer getting their entire dispurement up front, while others prefer the option of receiving a steady monthly payment to supplement their retirement income. Regardless of which distribution plan you pick, you are able to adjust your plan as often as you wish to accommodate changing needs.
Outlined below are the different reverse distribution plans to fit your needs and desires.
Term – Equal monthly dispursement that is fixed for a predetermined period of months.
Lump Sum – Cash immediately available in a lump sum (often to payoff an existing mortgage)
Tenure – Equal monthly payments as long as at least one homeowner lives and continues to occupy the property as a principal residence.
Combination – An immediate cash advance in addition to monthly allotments.
Line of Credit – A credit line which the customer can draw upon as he or she wishes.
Most are adjustable rate mortgages. The following options and factors apply:
Choose between a monthly or annually adjusting rate.
Rates are tied to the one-year U.S. Treasury Security Rate.
Interest rate adjustments has no effect on the amount of or number of loan advances you can receive, it however causes the loan balance to grow at a faster or slower rate.
The loan is due and payable when you no longer occupy the property as your principal residence or fail to comply with the loan agreement.
The only requirement is that the loan be repaid in one payment. There is no requirement that the property be sold, only that the loan is repaid. This may occur either through the sale of the home or through other resources (such as savings or possibly applying for a new mortgage).
Effect on Public Benefits
Loan proceeds are not considered income and will not affect Social Security or Medicare benefits because these programs are not based on need.
However, your monthly reverse mortgage advances may affect eligibility for some programs. Consult your local program offices to determine how, or if, monthly reverse mortgage payments might affect your specific situation.
Previous posts in this “Reverse Mortgage” series: