A reverse mortgage is a loan where the lender either pays you a lump sum at one go, makes regular monthly payments, extends a line of credit, or a combination of the three. You continue to own your home and pay property taxes, operating expenses and also maintenance. But because you make no regular pay outs on the loan, the balance owed rises each month with however much interest applied to it. There are a number of pros and cons for the various reverse mortgage payments options. Reverse mortgage payments as line of credit is when the access funds are at your discretion.
Pros to reverse mortgage payments as line of credit are flexibility as you can access funds anytime, whenever you need them. Extra income is another pro to these types of reverse mortgage payments - you can use your equity to supplement your retirement income or you can take a lump sum of cash and a monthly check. A con to this payment type is the spending lure as the funds can be easily exhausted. Another con to these reverse mortgage payments is the red tape: to access your funds, you must submit a written request to the loan servicer managing your account. Term reverse mortgage payments: here you receive fixed monthly payments for a set period of time.
Pros for these reverse mortgage payments types are instant transfer: funds are instantly and automatically deposited to your bank account meeting your instant finance or emergency needs and also regular money generated: you can receive large monthly advances helping in planning out your regular expenses. A con to term reverse mortgage payments is the fixed amount: the amount of funds you receive each month is fixed, so if you need additional funds, you will have to request a payment plan change, but also that monthly advances are not indexed for inflation. |
