A senior gentleman called me last Friday. He wanted to discuss reverse mortgage options, in particular he wanted to know a dollar figure we might loan on his home given it's current value.
I pulled out my supercomputer, punched in the numbers and out popped about $130,000. He said, "let's do it". So, what he wants to do with the money is take all $130,000 and put into his bank account. He'd make draws thereafter for living expenses.
The first thing I did was to, in no uncertain terms, tell him he shouldn't do that. How he uses the reverse mortgage is based upon his needs. His needs are basic. He only wants extra money to add to his current income.
He owns his home outright. All he wants is some 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.
My borrower has these four options:
Number one is for the mortgage company to deposit a large glut of money right into the borrower's bank account. The borrower can use this lump sum option to pull out any amount at or less than the mortgage companie's alottment.
Number 2 is for the borrower to receive a monthly payment. The borrower may determine the amount, which may have an end date when the money runs out, or the bank may set a number which lasts in perpetuity.
The 3rd choice is to opt for a line of credit. In this circumstance the lender allows the borrower to pull money out on an as needed basis. Unused money does not accrue interest against the home's value. For this reason this third option is a very popular choice.
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.
Number 4 is to combine our prior 3 plans in some way.
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.
Different choices exist because we all have unique situations.
I pulled out my supercomputer, punched in the numbers and out popped about $130,000. He said, "let's do it". So, what he wants to do with the money is take all $130,000 and put into his bank account. He'd make draws thereafter for living expenses.
The first thing I did was to, in no uncertain terms, tell him he shouldn't do that. How he uses the reverse mortgage is based upon his needs. His needs are basic. He only wants extra money to add to his current income.
He owns his home outright. All he wants is some 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.
My borrower has these four options:
Number one is for the mortgage company to deposit a large glut of money right into the borrower's bank account. The borrower can use this lump sum option to pull out any amount at or less than the mortgage companie's alottment.
Number 2 is for the borrower to receive a monthly payment. The borrower may determine the amount, which may have an end date when the money runs out, or the bank may set a number which lasts in perpetuity.
The 3rd choice is to opt for a line of credit. In this circumstance the lender allows the borrower to pull money out on an as needed basis. Unused money does not accrue interest against the home's value. For this reason this third option is a very popular choice.
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.
Number 4 is to combine our prior 3 plans in some way.
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.
Different choices exist because we all have unique situations.
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