The Reverse Mortgage Line Of Credit Is Increasing In Popularity – Here’s Why

Reverse Mortgage Colorado Financial PlanningThe HECM Reverse Mortgage Line of Credit is still relatively new, and to this day many within the financial and retirement industries haven’t fully grasped how it works.  Well, they need to get on board because consumers are interested – and they should be.  Here’s why..

First, what is a line of credit?  Simply put, a line of credit are funds available to you through a financial institution that you can access as needed, or not at all if the need doesn’t arise.  Interest is not acquired if the funds are not used.  This makes line of credit options excellent safety nets, especially for the purpose of creative retirement strategy.

When looking at a HECM Reverse Mortgage Line of Credit, the two are obviously intertwined, meaning the qualification requirements for any reverse mortgage still apply.  These are: age 62 and over, using your primary residence for the loan, this home must meet HUD’s guidelines and needs to be either paid off or have substantial equity, and the borrower must have the financial capability to continue to pay homeowners insurance, property taxes, and the like. Because there are various options to receive the payout from a reverse mortgage, the line of credit is only one of them.

When you have a reverse mortgage line of credit, you have money that is available to you — but you only accrue interest on the money you withdraw.  This means the reverse mortgage line of credit can act as an excellent back up source of funds or can be used for retirement fun, whether it be vacation, spoiling grandchildren, or knowing you have the funds available when you’re ready to take on new ventures.

There are other benefits though.  This line of credit is pretty astounding beyond just being a safety net.

Growth: Not only are you not paying interest, but your untouched reverse mortgage line of credit can grow in value. Money in a reverse mortgage line of credit grows at the same rate as the interest rate on the loan PLUS 1.25% monthly.  So, if the interest rate on your reverse mortgage is 2.50%, then your line of credit will grow at 3.75% (2.50% + 1.25%).

Unique: This growth is unique to reverse mortgage lines of credit — a HELOC for example does not grow.

Hedge Against Falling House Prices: The growth in a reverse mortgage line of credit is guaranteed — without withdrawals, your line of credit is guaranteed to grow.  This means you lock in the current value of your home without taking out an interest acruing loan.

Pretty great, isn’t it?

Jan Jordan is a Reverse Mortgage Specialist serving the Erie, Firestone, Fort Lupton, Fort Collins, Loveland, Greeley, Longmont, Boulder and other Front Range areas of Colorado.  Click here to contact Jan and learn if reverse mortgage is right for you.

One thought on “The Reverse Mortgage Line Of Credit Is Increasing In Popularity – Here’s Why

  1. Hi Jan – It’s been a long time, hope you are doing well! Terri and I would like to find out more about RM as we plan ahead for retirement. I am 61 and T is 62. FYI – I just took a severance package from Emerson after 30+ years. (I am looking for my next job).

    Our home is located at 4126 Amber St Boulder – appraised value approximately $650k. For reference the house across street is for sale today for $715k. Although our house is not fully paid off today we are considering a full payoff this year or early next year. So we want to use the full equity appraised value as basis for the RM. (monthly payments to us in addition to our SS and other retirement funds) + I will continue to paint art and make an income.

    That’s our story and we would like to be further educated about RM – I can’t think of a better person to learn from than you : )


    Mike Brouse (303-588-4343)

    We do not have children. We are considering RM as part of a retirement strategy.

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