Choosing your payment option may seem to be an easy task, especially when you are aware of your particular needs and wants at the time your funds are released. But did you know you can chose a line of credit and make your money grow? Yes it is true. The equity line of credit grows at a rate of 0.5% plus current monthly interest rate being charged on the loan. Do not be confused and think the interest is earned but rather it is accrued monthly and only used on unused money from your reverse mortgage.
The reverse mortgage program is also call the HECM or the Home Equity Conversion Mortgage program. This program was designed to assist mature Americans or borrowers who are 62 years of age and older to use the equity in their home to supplement their monthly income. The program has been around for approximately 20 years and until recently the participation has increased and at least 66% of its participants choose to use the equity line of credit.
So how will the program work for you? If you have any unused money from your reverse mortgage proceeds and you have selected the equity line of credit payment option then all you have to do is retain the unused portion and watch it grow. Of course there are some additional stipulations such as:
· All federal insurances such as your homeowner's insurance and flood insurance must be maintained and paid in order to keep your money available to you. Because the HECM program is federally backed by Federal Housing Authority (FHA) and the Housing of Urban Development (HUD) and often serviced by federal mortgage companies such as Fannie Mae, the insurances on all loans must be paid in order to keep your money coming to you.
· Fortunately, because the program is federally supported your money cannot be frozen or closed while you have a balance in the equity line of credit account. While many other banks are closing or freezing their customers lines of credit the HUD and FHA wants to ensure you are able to receive your money. After all the reverse mortgage program pays you for participating as long as you stay in your home.
· Your unused money does not accrue interest. That's right you do not have to pay interest on the money you are not using. You only have to pay interest for the money you have used.
Your money is accessible when you need it in an equity line of credit, which gives you the freedom to plan for your financial independence. The equity line of credit, like the monthly payments, is not available with the fixed interest rate reverse mortgage program. You only receive these payment options with the adjustable interest rate reverse mortgage. The only payment option available for the fixed interest rate reverse mortgage is the lump sum option.