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 Education
 Loan Payout Options
There are five basic payment types for a Reverse Mortgage Loan. The payment type elected will impact the amount of money you receive.
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LUMP SUM: Receive all cash proceeds at once, or in one lump sum. |
| Pros: |
Proceeds are used for estate planning or for a specific need.
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Cons: |
There is no annualized growth rate (see definition) benefit on unused loan balance since all of the available funds have been disbursed. |
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LINE OF CREDIT: A dollar amount of funds available that can be drawn from at the election of the borrower |
| Pros: |
Use the money when you need it. Annualized growth rate increases unused balance over time, depending upon loan type. Interest is only charged on amount used.
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Cons: |
If you need to write a check every month for expense needs, a monthly payment plus the line of credit would be a better choice. |
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MONTHLY PAYMENT FOR LIFE OR AS LONG AS YOU LIVE IN HOME: |
| Pros: |
Security exists in receiving a monthly check for as long as you occupy the home. Excellent option if you need help in meeting expected monthly expenses and managing financial discipline.
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Cons: |
Monthly payments are lower than for a fixed term. No access to cash if large expenses or repair needs arise. |
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MONTHLY PAYMENT FOR A SPECIFIED TERM: |
| Pros: |
Receive higher monthly payments since the term is specified (i.e. 5 or 10 years). Good if you know you will be moving from your home at a specified date.
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Cons: |
At the end of the term, the checks stop coming. |
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COMBINATION OF ANY OF THESE OPTIONS ABOVE: |
| Pros: |
Monthly payments to assist in meeting everyday expenses plus a line of credit for unexpected costs such as home repairs.
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Cons: |
Balance in credit line is reduced restricting the amount of money that can be withdrawn at any given time. |
NOTE: With the exception of a lump sum distribution, for the vast majority of reverse mortgage loans, you can always change your payment options and terms with your lender for a nominal fee.
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