Unlike typical loans, where you request a certain loan amount based on your needs, there are three factors used to determine what you are eligible to borrow with a HECM Reverse Mortgage.
YOUR AGE
The older you are the more you are eligible for;
YOUR HOME'S VALUE
The higher the value the more you can borrow; and
THE CURRENT INTEREST RATES
Lower interest rates mean more money to you.
When your eligible loan amount is determined you must then decide how you wish to receive your money.
You may receive the amount in a single lump sum of cash, a credit line, flexible monthly cash advances or any combination of the three.
You must continue to maintain your home, pay your property taxes and homeowners insurance for as long as you have a H.E.C.M. Reverse Mortgage
Since you are not required to make any payments, for as long as you have your HECM Reverse Mortgage, the original amount you have borrowed will grow at the current interest rate. This rate is typically adjustable and tied to the one-year U.S. Treasury Security. Fixed rate HECM Reverse Mortgage loans are available but usually require upfront draws.
If you decide to move, fail to live in your home for 12 consecutive months due to physical or mental illness or die your H.E.C.M. Reverse Mortgage must be repaid.
OPTIONS TO RECEIVING YOUR PROCEEDS
LUMP SUM
If you choose to receive your proceeds in a single lump sum of cash, you may use the cash for any purpose you see fit. There are no restrictions;
LINE OF CREDIT
If you choose the line of credit, the amount in your credit line is not debt and therefore will not incur interest, in fact, it will grow at ½ percent (0.5%) more than the interest you are charged (on the amount you owe). The growth on your credit-line-fund is an increase in what you were initially eligible to borrow. It is not interest earned and therefore would not be reported as income. You may access these funds, as often as you wish, until they are exhausted. This credit-line-fund option is typically chosen, if you do not wish to borrow all that you are eligible for, at closing;
MONTHLY ADVANCES
If you choose monthly advances you may change the amount and the frequency in which you receive your funds at any time.
REPAYMENT
Your HECM Reverse Mortgage must be repaid, in-full, when the last surviving borrower dies. Upon death, your heir(s) will inherit your home and they must choose how they will repay your debt. Typically the heir(s) will sell your home, pay off the debt and divide the remaining amount, according to the terms of your will or Living Trust. If your heir(s) choose to keep your home, they must pay-off the debt with their own funds, loan, refinance or obtain their own H.E.C.M. Reverse Mortgage; depending on what they qualify for and desire. As long as your heir(s) are marketing the property in good faith, they are typically allowed three-month periods, up to one-year before repayment is required.
