HECM Payment Options

/HECM Payment Options

This is one of the most frequently asked questions and the answer is that there are several different payment options. Each has been configured to meet additional financial needs and increase cash flow under a variety of different circumstances. It is generally up to the discretion of the borrower, which payment options are used.

  • Modified term line of credit: Under this payment option, the borrower may set up a specific time period for receiving a fixed amount of funds on a monthly basis as a line of credit. This type of loan is especially beneficial if the borrower will have higher expected expenses for a period of time.
  • Modified tenure line of credit: The modified tenure line of credit is used when the borrower desires to establish a set monthly amount for the duration of the time that he or she occupies the home.
  • Line of credit: This is the total amount that is established and may be accessed as funds are needed. The process for accessing line of credit funds includes a written request submitted by the borrower to the company administering the loan. Line of credit loans accrue interest on unused fund balances, but these proceeds do not go to the homeowner, rather, they enhance the value of the line of credit.
  • Single disbursement lump sum: This loan payment option allows the borrower to withdraw smaller amounts of the loan in order to maintain a higher level of home equity.
  • Term payment: Borrowers may opt to establish a fixed monthly payment amount for a specific time period. The value of the home does not affect the established payment amount, even if there is a decrease in its value. This payment type is a good option where there will be a gap in income streams for a specific period of time and it helps to cover any temporary financial deficits on a monthly basis.
  • Tenure payment: With the tenure payment, the borrower may establish a fixed monthly amount for the duration of time that he or she lives in the primary residence. The payments continue until the borrower either permanently vacates the home or passes away, even if the balance of the loan becomes higher than the value of the home.
  • For purchase option: The For purchase payment option is used when a borrower wishes to purchase a smaller residence to downsize. The old home is sold and the new home is purchased with the proceeds from the sale and any other income sources, including reverse mortgage funding. When this option is used, no monthly mortgage payments exist for ownership of the new home.