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In a blind test, most people chose a Reverse Mortgage Line of Credit over a traditional Home Equity Line of Credit (HELOC). It offers many of the same benefits of a HELOC— as well as some important advantages. Watch the video to learn more about a Reverse Mortgage Line of Credit.
Both a Traditional Home Equity Line of Credit and a Reverse Mortgage Line of Credit require the borrower to meet all of the terms of loan.
¹ As with any home-secured loan, a consumer with a reverse mortgage must continue to meet his/her loan obligations, pay property taxes, homeowners insurance, and any homeowners association (HOA) fees and cost associated with home maintenance. ² If part of your loan is held in a line of credit upon which you may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on your loan.
The unused portion of a Reverse Mortgage Line of Credit grows at a rate equal to the loan’s current interest rate plus 1.25%—independent of home value.
The information being shown is for illustrative purposes only. Scenario is a 62-year-old couple, with a home valued at $450,000 and no mortgage, securing a reverse mortgage line of credit (LOC). LOC will grow at 4.50% above the 1-year LIBOR (margin = 3.25% + ongoing Mortgage Insurance Premium of 1.25% = 4.50%). The initial LOC is $228,139.85; left unused, in 10 years, when they are 72 years old, LOC will have grown to $426,590.21 in available funds. In 20 years, at age 82, assuming no withdrawals the amount available will be $797,272.25. The estimates shown are based on a CA property and Reverse Mortgage Funding LLC’s HECM Annual ARM as of 03/06/2017. The initial Annual Percentage Rate is 4.433%. The loan has a variable rate. The rate is tied to the 1-year LIBOR plus a margin of 2.625%. There is a 5% lifetime interest cap. This means that the maximum rate that could be imposed is 9.433%. In this example, closing costs include an origination fee of $2,250, third-party closings costs of $2,437.45, and an up-front FHA Mortgage Insurance Premium of $2,250 depending on the appraised value of the property securing the loan. Interest rates and funds available may change daily without notice. L867-Exp032018