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| Using Reverse Mortgage Cash Out Options Wisely |
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| Written by Mulroony Vanrock |
| Thursday, 15 January 2009 09:46 |
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So, a potential customer calls me the other day and inquires about the reverse mortgage and how much money he can get out of his house assuming it appraises at a certain amount. I calculated a sum of roughly $140,000, and he decided to move forward. His goal was to take the whole amount and plop it into into his local credit union account, live off of needed funds and earn interest on the balance. I say, "slow down there partner, I don't think this is your best choice". He has a very typical reverse mortgage need. That is the need for additional funds to cover life expenses. All my prospective borrower wants is some monthly supplemental income. For reverse mortgages borrowers have four ways to draw upon the money alots them. My guy on the phone chose the one most likely to hurt his financial situation. Here are the four options: The first is simply to do as he wants and take a large lump sum. The lender will set a maximum cash out amount. The borrower can take this amount or a portion thereof out at any time. The second option is for the lender to send monthly draws to the borrower. The borrower can choose to receive money until death, in which case the lender sets the amount the borrower will receive. Or the borrower can set an amount to be received every month. A popular option is to use a reverse mortgage line of credit. In this instance the mortgage company alots a loan amount. The borrower simply leaves the alotment in the line of credit until it's needed. The benefit is no interest accues against the home while the money is in the LOC. Another important point to note about the line of credit is money sitting in the line of credit is accruing interest for the borrower's favor thus increasing borrowing power over time. The fourth option is to use a combination of any of the three plans just mentioned. In my borrowers case the line of credit option was his best choice because he didn't need a large lump sum up front. He only needed some money from time to time. Additionally, by using the line of credit is interest burden would be kept to a minimum. The point is it is all situational. Your situation determines the best choice for you. About the Author: Kindly provided by LJ-Marketing.dk You are welcome to use this article on your own website, if you include the link just before this text. |
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