Disbursement Options
Let's look at a hypothetical scenario. Assuming your home is worth $300,000 and your net approval is $200,000, you have several options on how to access that $200,000:
- Lump Sum: You can receive the entire $200,000 up front and deposited into your bank account.
- Monthly Payments: You can receive a fixed amount deposited into your bank account every month. This can be set up for a specific number of years, or for as long as you have the reverse mortgage.
- Line of Credit: You can leave the $200,000 in a line of credit and withdraw money as and when needed. On your monthly statement, you'll see the amount available to you growing every month. For example, if you did not withdraw any money from the line of credit for one year, the amount available to you after the first year could be $207,000. The rate of growth is explained in detail in the glossary.
- Future Changes: You can switch back and forth between a line of credit and monthly payments after you have a reverse mortgage. A nominal fee is charged for each adjustment.
- Combination: You could receive $50,000 in a Lump Sum, $1,000/month for as long as you have the reverse mortgage, and $32,000 in a line of credit.
- Fixed Rate vs. Adjustable Rate: All of these flexible options are available to you if you select the Adjustable Rate. If you prefer a Fixed Rate, the Lump Sum payment to you is your only option.
- Existing Mortgages and Liens: All existing mortgages and liens must be paid off with the reverse mortgage proceeds. If the money from the reverse mortgage is not enough to pay off the liens, the homeowner must make up the difference.