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Frequently Asked Questions
Q: Are there considerations to consider when selecting a payout plan?
A. If you take a credit line account, the total amount of cash you actually receive will depend on two things: how much of your available credit line you use, and whether the credit line is "flat" or "growing." With a flat credit line, the amount of remaining available credit at any time only changes if you take a cash advance, at which point it decreases by the amount of the advance. For example, if you have a flat $50,000 credit line and take out $10,000, you would have $40,000 left whenever you decided to take out more. But with a growing credit line, your remaining available credit grows larger by a given rate. For example, if you took $10,000 from a $50,000 credit line that grows by 8% each year, and then came back for more three years later, there would then be over $50,000 left to use - because the remaining $40,000 growing at 8% per year would become $50,388 after three years. So a growing credit line can give you a lot more cash over time than a flat one. That’s why you need to look at more than the size of a credit line when a reverse mortgage starts. You also should consider how much available credit would be left in the future. This will also depend, of course, on how much you take out and when you take it. The credit line in the Home Equity Conversion Mortgage (HECM) program grows larger each month by the same rate as the one being charged on the loan balance. It keeps growing for as long as there is any credit left, that is, until you withdraw all your remaining credit.
If you take monthly loan advances, the total amount of cash you actually receive will depend on whether you select a plan that sends them to you for a specific number of years, or for as long as you live in your home. It will also depend how long you actually live in your home.
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