Understanding a Reverse Mortgage Line of Credit

Many people today have a line of credit (HELOC) extended to them through their mortgage company. It enables them to have access to cash when they need it and they pay interest only on the amount of money that is withdrawn from their equity. Although the basic principles are the same with a reverse mortgage line of credit, there still are several differences that are worth considering for a senior looking for a larger cash flow in their retirement years.

Your Financial Situation Does Not Matter

In order to get a traditional HELOC, you have to be able to make the payments as you would for a traditional mortgage. This means that you must have an income large enough to add a new payment on top of others.

A reverse home mortgage, however, does not require any payments while you are still alive or living in your home. Because of this, it does not matter whether or not you have any income at all. Since you are not going to be making any payments, your financial situation is not even something that will be considered.

Another great feature is that your home becomes paid for when the reverse mortgage is obtained. Any other mortgage that you have is paid for and the rest of the equity goes toward the cost of the reverse mortgage loan, the fees and interest, and toward however you want it given to you. You have less bills and a line of credit with money available.

Your Available Money Will Grow

In a line of credit with a traditional mortgage, the amount available to you is constant - it does not change. With a reverse mortgage, however, the amount of money that is in your line of credit grows as the value in your home grows. This enables you to have an increasing amount of money - depending on the economy. This growth, however, cannot be passed on to your heirs.

Your Money Is Guaranteed to be Available

Many people with traditional lines of credit recently have found that they cannot access more money. The lender has frozen their money and they can no longer get to it. An FHA reverse mortgage, however, will not freeze your money. Money in your line of credit is guaranteed by the government to be available when you need it. A government reverse mortgage (HECM) is the only type of mortgage that has such a guarantee.

Your Age Will Affect Money from a Reverse Mortgage

Another thing is that you probably would not want to get a traditional line of credit if you are retiring. The reason would be because you would gain a new regular payment. In a reverse mortage line of credit, though, you will actually be able to get more money the older you are. This is because payments do not need to be stretched out so long.

Money from a reverse mortgage can be given to you in three ways, as a lump sum, a monthly payment, or as a line of credit. Any combination of these is also possible, making it the ideal way to tap into your home's equity and use it to create a cash flow that does not need to be repaid as long as you live in your home.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of "62 Senior Moments." If you would like more information, please call (866) 683-3690 or visit our Reverse Mortgage website.