This is the third part of a three part series on the payout options in regards to a Reverse Mortgage. In the last two posts we addressed the two most common ways to receive loan proceeds from a reverse mortgage, the line of credit (LOC) and the lump sum payment. Today we are going to talk about the third (and least common) way to receive your money, the monthly payment option.
When a client chooses to take monthly payments they essentially have two options available to them; Term payments and Tenure payments.
Term: A term payment basically means that the client will select a period of time, called a term, and they will receive equal monthly payments for that Term that will equal the total amount of proceeds available from the reverse. For example, a client might say that they would like to receive their proceeds over a term of four years as they are planning on moving at the end of that time. Four years would be 48 months so whatever amount of money is available to the client would be broken up into 48 equal monthly payments. A client can also use the term option in reverse and say I need to take $1,500 per month, how many months can I receive that much money? The term would be the number of months they can receive that $1,500 payout.
- Tenure: The tenure option is different from the term option because tenure payments are equal payments over an indefinite period of time. Once the reverse mortgage calculator determines what the tenure payment will be, the client is eligible to receive that amount of money for as long as they stay in the reverse mortgage. There is no limit on the length of time a client can receive a term payment. For example, a client might qualify for a term payment of $830. In this case the client will receive $830 every single month for as long as they are in the home. It doesn’t matter if they live 5, 10, 15, or even 50 more years, they will continue to receive $830 per month indefinitely. When the loan becomes due and payable they will owe back the amount of their principle balance up to the current appraised value of the home, just like with any other payment option.There is also a hidden fourth option for taking the proceeds from a reverse mortgage. The client can chose to combine any of the three ways to take their funds and customize a package that is best for their specific situation. A reverse licensed professional will be able to help you with this but for example let’s say that a client qualifies for $100,000 after paying their existing mortgage and financing their closing costs. The client can take $30,000 as a lump sum payment at the closing table, leave $20,000 in their credit line to grow over time, and take the remaining $50,000 in equal monthly payments for some term till they run out.
The client also always has the right to contact their servicing company and for a small fee ($30-$50) they can change their payment structure at any time (once per month).
This concludes our three part series on the Reverse Mortgage Payout options, if you have any other questions, please do not hesitate to contact one of our bankers at One Reverse Mortgage.com, or leave us a comment, we will get back to you as soon as possible.