One important decision you'll have to make when you get a reverse mortgage is how you want to receive your payments. In most cases, you won't be able to change your payment type, so it's important to put some thought into how you will use the money and select the option that best fits your needs. Here are four ways you can receive your reverse mortgage payments to help you determine which one will work for you.
This is just as it sounds. Instead of receiving monthly payments, you would get the proceeds from the reverse mortgage in one big check. This is a good option if you have expenses that must be paid immediately or you want to make a large purchase. For instance, if you need a medical treatment not covered by your insurance, getting a lump sum reverse mortgage is a good way to pay for it.
This is the most common way reverse mortgage payments are dispersed. You receive a set monthly payment based on several factors until you exhaust the funds in your loan. These monthly payments are typically determined by your age, the loan amount, and whether you want to receive payment for the entire time you're in the home (tenure) or for a specific period of time (term). This option is good if you want to have a dependable source of monthly income.
Line of Credit
If you prefer to get money only when you need it, you may want to have your reverse mortgage dispersed at a line of credit. This payment option is similar to a regular home equity line of credit in that you take out money in amounts and at times when you want. The primary difference is the money doesn't need to be paid back until after the last homeowner passes away. Additionally, you'll typically need to submit requests for payments to the bank who financed the reverse mortgage and the amount is then deposited into your checking or savings account within a couple of business days.
For those who are unable to decide between a line of credit and monthly payments, it's possible to select a payment type that combines the two. Part of your reverse mortgage would be paid out monthly while another part would be available as an accessible credit line. While this may result in lower monthly amounts, you'll be able to withdraw chunks of cash to pay for big expenses whenever they show up.
To learn more about these payment types or about reverse mortgages in general, contact a lender near you.