Are monthly payments required?
Reverse Mortgage: No monthly payments are required for the life of the loan. Home Equity Line of Credit ( HELOC): Yes, usually interest only, for an initial drawdown period, then payments increase to amortize the loan balance.
Do I have to pay upfront costs?
The adjustable-rate reverse mortgage closing costs include a premium for FHA insurance, costs are similar to conventional loans and may vary depending on individual program facts. The HELOC, also an adjustable-rate loan, is not FHA insured so no premiums are required. Upfront costs vary by lender but generally feature low or no costs depending on lender promotions and borrower circumstances.
Is credit line growth guaranteed?
Yes, with a reverse mortgage. Undrawn credit line balance grows at the same rate charged on the balance owed. Growth may potentially exceed future property value, providing a hedge against property value declines and interest rate increases.
No for a HELOC. The credit line amount does not grow, and access to funds stops at the end of the initial withdrawal term.
Is there a mandatory payoff date?
No with a reverse mortgage. Repayment is not required as long as the borrower continues to reside in the property, and the loan remains in good standing.
Yes, with a HELOC. The maturity date is usually 30 years or less. Only the first 7-10 years provide access to funds. In the remaining years, payments are reset and increased to pay the balance off.
Can my lender freeze/limit access to funds? Reverse mortgage: No, funds can be accessed any time during the life of the loan, and lenders cannot freeze access to funds, as long as the loan remains in good standing. HELOC Yes, access to funds is limited to the initial draw-down period. (normally the first 7 to 10 years.) Most HELOC’s also enable lenders to freeze with notice.
Can I (or my heirs) ever be liable?
Reverse Mortgage: No, the balance owed can never exceed property value at the time of repayment. HELOC: Borrowers are personally liable for any deficiency plus legal and collection costs.
To learn more about reverse mortgages, contact your local certified Reverse Mortgage Professional (CRMP) for guidance and expertise.