Archive for February, 2010
As explained in earlier posts, a reverse mortgage can take the form of a lump sum. You agree the amount with the provider and then that is the amount that you receive when the mortgage completes.
So who is the type of reverse mortgage suited for and what are the pros and cons?
If you are particularly good at managing your money, then why change the habit of a lifetime? Instead, receive a lump sum and put your money to work like only you can. Investments, savings and speculation, if done right, can make a reverse mortgage very appealing.
Also, many people require a lump sum from their reverse mortgage because they are looking to make a big expenditure with the money. Perhaps you need a new car, planning on buying a holiday home or a summer house. What about that RV you have been looking at for years. Either way, you will probably need the money there and then, rather than in a line of credit form.
If you aren’t so good at managing your money or don’t have any other reason for wanting the money upfront, then perhaps a line of credit would be the best option.
You may have heard of a line of credit reverse mortgage and have been wondering since what the full story is.
A line of credit reverse mortgage is pretty much as it sounds – the provider assesses your eligibility for a reverse mortgage and decides exactly how much you are allowed to borrow. From then on, although you have been approved for that amount, you do not have to take it as a lump sum. Instead, you can drawdown from this approved amount, as and when you need it.
Of course the benefit of this is that you don’t have to pay interest on the money that you haven’t drawn. If you are looking for a reverse mortgage as a safety net – knowing you have access to cash as and when you need it – then this particular type of reverse mortgage is very useful.
Obviously if you are looking to buy a second home or a major purchase like an RV, the line of credit may not be for you and you’d be happier with a lump sum.