Reverse Mortgages - "What ways can I get the procedes?"

Reverse Mortgages allow many different ways to utilize the equity in your home as a tool to finance a more comfortable retirement, pay for medical bills or many other reasons. The question everyone has when they are considering a Reverse Mortgage is, "How can I get the proceeds?"

This may sound like a typical response, and it is, but it depends on your unique situation and your goals. There are a few different options available to you when taking out a Reverse Mortgage and it depends on the type of loan your are getting that decides which of these options are available to you. The options are: 1) Lump Sum advance 2) Line of Credit 3) Monthly Cash payments or 4) any combination of the above. Lets look at a few different scenarios and how you can use a Reverse Mortgage to provide the most benefit for your situation.

If you are a homeowner living on Social Security with some mortgage debt left owing and you are just getting by every month it may benefit you to utilize the monthly payment option of an FHA HECM Reverse Mortgage. What you can do is use a lump sum, option 1 from above, to pay off what you currently owe and then you can request the remainder of your qualifying amount to be paid to you in monthly payments. Of course, your going to want to make sure that the payments you will receive aren't going to run out down the road, this can happen if you adjust the monthly payments up to get more every month for a fixed period of time. The advantage of using the monthly payment option is that you can set a budget and know how much you will be receiving every month as opposed to getting all the money right away and the worrying about making it last the rest of your life.

For homeowners whose home is more expensive or owe more on the home than an FHA Reverse Mortgage will qualify for then you may look into a Jumbo Reverse Mortgage. In this case you are limited in the options you can use. Most non-FHA proprietary Reverse Mortgages will not allow a monthly payment to be made to the homeowner, they only allow a lump sum advance or a line of credit. One little trick that you can use however is that you can schedule a monthly draw from your line of credit that "acts" like the payment option for FHA loans but is not guaranteed from the FHA. You can also combine these two options as you see fit, for example, by paying off a mortgage and then taking the rest of the qualifying loan amount as a line of credit. The main advantage of a Jumbo reverse mortgage is, of course, that you may qualify for more money when you otherwise would not. The disadvantage is that the loan is not guaranteed from the FHA which may be worrisome for some homeowners.

There are certain situations with Reverse Mortgages where it's pretty cut and dry, for example lets say the amount you qualify for just covers the amount you owe. In this case you would use the lump sum advance to cover the debt you owe and would then not have a mortgage payment but no monthly payment to you or line of credit available.

Reverse Mortgages allow many different combination and options to provide the most benefit to the homeowner. It is, therefor, important to remember when discussing a reverse mortgage with your loan officer or financial advisor to go over all the different possibilities to make sure you are getting the best loan possible for your personal situation.

Written by Brianna Penley for the ReverseMortgageCity.com Media Center

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