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Reverse Mortgages 101

How Can I Receive The Loan Proceeds?

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You can take the loan in a variety of ways, including:

  • A lump sum cash advance.
  • Monthly payments.
  • A credit line that lets you take cash out as needed.
  • A combination of the above.

Homeowners whose circumstances change can restructure their payments for a nominal fee.

The stream of income from a Reverse Mortgage can be either open-ended or for a fixed term.

  • Open-ended. With an open-ended Reverse Mortgage, you receive monthly advances for an open period of time until a specified event occurs. For example, you receive the monthly payments for life. Payments stop at death.
  • Fixed-term. In a Fixed-term Reverse Mortgage you receive monthly advances for a fixed number of years.

The fixed-term type of approach can provide larger advances than open-ended Reverse Mortgages but the term is fixed. Because mortgage interest rates are generally variable, a fall in interest rates could reduce the monthly amount of income you receive.

Note: If you have a shortened life expectancy due to a health condition and want to use a Reverse Mortgage as a source of continuing income:

  • Keep in mind that you are not a statistic.
  • Expect that a loan for life will be based on the life expectancy of someone your age and possibly sex, rather than on your health condition. You may be able to obtain more money per month on a fixed-term basis.

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