The fifth Reverse Mortgage benefit is a growing line of credit.
Just to reiterate: There are three options on how you take the Reverse Mortgage proceeds:1) a lump sum 2) a monthly check 3) a line of credit
A vast majority of Reverse Mortgages are taken with a line of credit. Some loans are taken only as a line of credit and some loans have part of it taken as a line of credit.
There are a few reasons why lines of credit are the most popular: 1) Interest does not accrue on the unused portion 2) Medicaid is not affected by the proceeds if they are paid directly from the lender to a third party (they never become the borrowers assets.) 3) The unused portion of the line GROWS!
I am pretty sure that no other product in the world has this feature. This means that if you take a $200,000 line of credit and use only $100,000, the remaining $100,000 will grow constantly at whatever rate the used portion is accruing interest at. Today that's about 4% That means next year you will have $104,000 available and the year after that you will have $108,160 available to you (if rates stay at 4%.) The available funds grow and compound every year.
This also means that if rates go up, more interest will accrue on the part of the line that you used, BUT you will have more funds available to you because of it.
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