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If you are considering a reverse mortgage, a number of factors affect the amount of money you eventually receive. Primarily, those factors are: - Your available home equity; - Your home's location (state and county); - The age of the youngest person on the home's title; and - Current interest rates. But how you take your money -- that is, whether you take it all at once or over time, and in what form -- can affect how much money you receive as well. In addition, some financial goals are better suited to specific payout options. Choose the wrong payout option, and your reverse mortgage cash doesn't work as hard as it should. Once your reverse mortgage is approved, there are four payment types. You can: 1. Receive a lump sum check; 2. Take a line of credit, where you can write checks against the amount while unused funds grow; 3. Receive regular monthly payments; or, 4. My personal favorite, a combination of these. If you realize one payout type is wrong after you receive your reverse mortgage, don't worry. You can almost always change your mind. Virtually every loan program allows the ability to switch at any time. For a small fee (usually $20 to $50), most lenders will re-compute the payout schedule and switch the method of payment. But let's look at these options more closely to understand which payment type might be best for your reverse mortgage. * Cash Lump Sum. This is a big check -- all the money at once. Not every expense should be paid off in this manner. This is not the best method, for example, for buying a car. It would be less expensive to get a conventional car loan. Nor is this the best method to get money to invest in the stock market. Investments are risky, and your taxable stock market returns would have to be very high to offset the cost of setting up this loan. However, this may be a good method for things like major home repairs, health care, or the purchase of an annuity as part of an overall estate plan. * Tenure Payment. This is a monthly payment for the rest of your life. (Technically, if you read the fine print, they use 100 years for calculation purposes. However, your payments will never stop. If you pass the century mark, you win; they lose.) Tenure provides a sense of security, since you know the check will always come, month after month. However, tenure payouts will provide you with lower monthly payments (because the rest of your life can be a very long time). They are often a good choice if you just need help with regular monthly living expenses. * Term Payment. This is a monthly check, like tenure payments, only for a fixed period. The most common terms are 10 years, 12 years, or 14 years. The money stops at the end of the term. This is especially good if you have high costs now (such as for travel or home repairs) and you are absolutely certain you will have lower expenses in later years. It is also a good possible option if you have other money set aside for living expenses, since once the term is up, the money is gone. * Line of Credit. This option is a checking account with all of the reverse mortgage cash. You earn interest on any unused balance. Typically, you are given a checkbook, and can write checks against the line of credit, just as you would an ordinary checking account with your bank. With a HECM loan, you earn interest on the unused portion. With a Home Keeper loan, however, you do not, making this a more viable option when used as part of a HECM reverse mortgage. While this option allows for maximum flexibility, it is not for anyone who is likely to spend all of the money at once. When the money is gone, it is gone. * Combination. This means just what it sounds like -- any mixture of the above options. For example, you might take a $6,000 lump sum to get the home remodeled, plus take $300 per month for a 10-year term payout; and finally, take a $10,000 line of credit (just in case something comes up). Fine tuning your reverse mortgage payout is extremely important. As you can see from the above example, the payout type can greatly impact how much money you receive, as well as whether or not it comes in a way that helps you achieve your financial goals.
Article Source: http://www.realestateinvestmentarticles.net
For more information on the details of reverse mortgages, order my book, Reverse Mortgages -- Cash for the Rest of Your Life! You can do that by visiting my web site, www.ReverseMortgageBook.com
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