What is a reverse mortgage line of credit (and should you get one)?
A reverse mortgage is a type of mortgage that involves a lender making payments to a buyer instead of the traditional mortgage where a buyer makes payments to a lender. The debt owed to the lender increases with time while your equity decreases as it goes to the lender. The payments made to buyers are often made with the intention of supplementing income for retirement.
What’s the difference between a reverse mortgage line of credit and a regular reverse mortgage?
- Reverse mortgage line of credit — A reverse mortgage line of credit acts more like a credit card for buyers. It allows for a certain amount of money to be borrowed upon request and is guaranteed to the buyer. The reverse mortgage line of credit also increases each month if the agreements of the mortgage are met.
- Regular reverse mortgage — A regular reverse mortgage involves regular payments made to the buyer while the lender receives the buyer’s home equity. The payment amounts are made in fixed monthly increments, but borrowers also have the option to receive a lump sum payment.
Who might benefit from a reverse mortgage line of credit?
- Homeowners who have equity — Lenders most often offer this type of loan to homeowners older than 62 who are planning to enter retirement. Reverse mortgages can help homeowners because they can hold off on loan payments until a homeowner moves out, passes away, or sells their property. This can help homeowners save for retirement, but it’s important to know that if both of the homeowners move out, pass away or sell their property, the reverse mortgage loan becomes due.
It is important to be well informed before planning a reverse mortgage line of credit. Working with a CERTIFIED FINANCIAL PLANNER™ professional can help property owners make the right choice.
Talk to a ProVise CFP® professional about if a reverse mortgage line of credit is right for you
At ProVise Management Group, our CERTIFIED FINANCIAL PLANNER™ professionals can get to know you and your current financial circumstances, goals, risk tolerance, and personal values to help you develop a plan that works for you. We can also create a written plan for you at a fiduciary standard of care. All our written plans come with an unconditional money-back guarantee. If you are unhappy with your written plan, you can return it to us, and we will refund 100% of the fee paid.
Are you ready to talk to a professional about your reverse mortgage line of credit? Contact ProVise today to schedule a complimentary consultation.