What Are The Advantages to a Reverse Mortgage Line-of-Credit?
In a reverse mortgage a homeowner can access their money by means of a lump sum, line-of-credit, or monthly payout.
Today we will be focusing on the line of credit feature and all of its advantages.
A reverse mortgage line of credit has the potential to save you money on the monthly accrued interest and also increase the money you have available to take.
We will go over a few scenarios, so you can see first hand if these scenarios sound like your situation and if the line of credit feature might be your best option.
How Does The Reverse Mortgage Line-of-Credit Work?
There are many different ways you can go about searching for your best reverse mortgage lender or best reverse mortgage company.
Below are a few ways that ReverseAdvisors.org can help you in your search. We provide a list of approved reverse mortgage lenders, reverse mortgage companies and reverse mortgage advisors that range from national, statewide and local to your county or the surrounding area.
Do You Have a Low Loan Balance?
A line-of-credit allows homeowners to leave the majority, or all, of their available money in their line-of-credit.
Any money that is in the line-of-credit will not be charged interest for that month.
This can drastically reduce the amount of interest being accrued on the reverse mortgage loan.
In a scenario where a homeowners does not need a large lump sum payout then a line-of-credit might be the best option.
Don’t Need All The Money Available as a Lump Sum?
Sometimes it is quite simple.
A homeowner just doesn’t need all of the money they have available to them in a reverse mortgage.
Even if it is not considered to be a lot of money if they are not in need of it immediately then it is sometimes tough for them to justify taking it.
Instead it might be a better option to leave the money in a line-of-credit for future use.
Want Access to Even More Money Without Having to Take Immediately?
While this may not be an option for homeowners who’s loan-to-value is already at 90% or more this can really be an advantage to everyone else.
When choosing a reverse mortgage that does not offer a line-of-credit feature, like the fixed rates, there may be a scenario where there is money being left on the table.
With a fixed rate a homeowner can only cash-out 10% of the principal limit when the loan-to-value is exceeding 60%.
For example, if a homeowner has a loan-to-value of 70% then they would be allowed to cash-out up to 80%…leaving 20% on the table!
With a line-of-credit the homeowner would be allowed to access that remaining 20% after the first 12-months from their line-of-credit.
Find only the best reverse mortgage for you
The Reverse Mortgage Has a Credit Line Growth Rate!
The reverse mortgage has a credit line growth rate!
…What is a growth rate?
The line-of-credit has rate applied to which it will grow each month.
This means you will have more money available to you next month than you did this month from the money left in the line-of-credit.
This is not like an interest bearing account where the extra money is money made. If that money is taken it does get applied to the reverse mortgage loan balance.
BUT it is extra money that is available to all homeowners, which can be a very big advantage in retirement!
Also, it should be noted that as of right now there is no credit line growth rate feature on the jumbo reverse mortgage option. Only the HECM reverse mortgages offer the credit line growth rate at this time.