What happens if I use all the funds in my reverse line of credit? 
That’s a great question! Once you have used all the funds available in your line of credit on a HECM reverse mortgage you can no longer take advances. However, as far as repayment or any additional obligations, there are none. You continue to own your home, live in it, maintain it, and pay your taxes and insurance.
There are some major differences between a reverse mortgage line of credit (or HECM LOC) and a traditional home equity line of credit (HELOC). Both are offered as variable rate loans, which means the interest rate rises and falls monthly along with the “index” described in your loan agreement. Here are some of the major differences:
HECM Line of Credit option is my personal favorite of the options for taking funds in a reverse mortgage! It is so flexible, giving the homeowner the most control over how they choose to use their equity.
That’s a great question! Once you have used all the funds available in your line of credit on a HECM reverse mortgage you can no longer take advances. However, as far as repayment or any additional obligations, there are none. You continue to own your home, live in it, maintain it, and pay your taxes and insurance.
There are some major differences between a reverse mortgage line of credit (or HECM LOC) and a traditional home equity line of credit (HELOC). Both are offered as variable rate loans, which means the interest rate rises and falls monthly along with the “index” described in your loan agreement. Here are some of the major differences:
- In a traditional line of credit, the bank may freeze or lower your credit limit based upon changing home value or creditworthiness. With a reverse mortgage line of credit, the funds are available regardless of your home’s current value or your current credit situation. Once you have a reverse mortgage line of credit, it’s there.
- Traditional Lines of Credit give often give you “checks” to write for advances. Very easy and quick. In a HECM HELOC, you must request the funds in writing (fax is okay), which is a little more cumbersome than just writing a check. However, when you request an advance of funds the lender has 5 days to get it to you once they receive your request or they owe you a late charge! I always love pointing that clause out to my clients when they are signing their loan documents.
- Traditional HELOC’s require montly payments from the borrower of at least interest. HECM LOC’s do not require monthly payments.
- Traditional HELOC’s must be repaid upon expiration of the loan term, usually 10 to 15 years. HECM LOC’s do not have to be repaid until the last remaining borrower permanently leaves the home.
HECM Line of Credit option is my personal favorite of the options for taking funds in a reverse mortgage! It is so flexible, giving the homeowner the most control over how they choose to use their equity.
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