California Reverse Mortgages by your Sacramento Reverse Mortgage Provider

Reverse Mortgage Disbursement Options

by Zach W Scott
May 19, 2011

Reverse mortgage funds are available in several options.  You may receive:

  1. An immediate lump sum in cash.
  2. A monthly cash payment as long as you reside in the home as your primary residence (or tenure plan).
  3. A term plan, for a term of months you select.
  4. A line of credit.
  5. A combination of the above.

Before making your disbursement decision, be sure to weigh the pros-and-cons of each option.  Every situation is different.  You may change your plan at any time, but a nominal fee may be charged.

If you select an immediate lump sum, you may receive all of your available reverse mortgage funds in one payment. If you take all of your available funds in a one-time lump sum payment, you will not receive any additional funds under the reverse mortgage program, even if the value of your home increases.

If you opt for a tenure plan, you will receive a pre-determined amount of funds every month until you no longer occupy the home as your primary residence.  If you plan on living in your home for the remainder of your life, you will receive the monthly payments as long as you live.  You may receive your monthly payment as a check or deposited directly into your checking account.

A term plan provides equal monthly payments every month for a specific number of months.  For example, you may want to receive all of your reverse mortgage funds over the course of 7 months or 7 years.  You decide the length of the term.

A credit line allows you to use your reverse mortgage funds whenever you desire-without scheduled payments or installments-until the credit line is exhausted.  The amount of cash you withdraw from your credit line is the amount of debt determined in your loan (plus fees and interest).

With some reverse mortgage products, the unused funds in your credit line will have a monthly or annual growth rate.  The unused funds are not actually making money; the growth rate allows you access to more of your home’s equity.

If the outstanding balance on your credit line reaches the credit limit, your lender may refuse to make additional extensions of credit.  This is similar to reaching your credit limit with a credit card.

You may also combine disbursement plans to suit your particular needs.  For example, you might need an immediate lump sum payment that does not use the total amount of funds available to you.  You may combine the two options by taking the lump sum payment and placing the remaining funds in a credit line.