Whether or not a reverse mortgage will provide seniors with sufficient money to live out their lives at home is a common question. The idea of tapping into home equity only to run out of cash at some point is frightening. Can you run out of money with a reverse mortgage? The answer depends on what type of payment option you choose.
Lump Sum Payments and Lines of Credit
With lump sum payments, you receive a single lump sum payment, to do with as you wish. How you receive the money depends on how you choose to spend the payout, if at all. It’s your money, to do with as you see fit. Remember, the younger you are when you take out a reverse mortgage, the further the money needs to stretch.
A line of credit reverse mortgage payment offers more security, as you can choose to use the money as a line of credit and make withdrawals as needed. Many seniors use reverse mortgage lines of credit as if they are taking out small loans, paying the “loan” back to themselves so they will have money for the future.
A third option, monthly payments, is a set payment made to you each month for as long as you choose. Even if the value of the home skyrockets or collapses, the payment remains the same. You could live in the home for five years and still receive the same payment. You can schedule these payments to last a few years or continue as long as you live in the home and honor your loan obligations. For however long you choose, you can have a reliable flow of money coming in each month. Because reverse mortgages are non-recourse loans, you never owe more than the fair market value of your home. If payments result in a loan balance that exceeds the home’s value, you’re not responsible for the excess.
Need more information about reverse mortgage payment options and tenure payments? Our licensed experts are ready to answer all your questions. Give them a call at (800) 401-8114.