There are three basic payment options for a Reverse Mortgage. Remember that when I say payment, I mean payment TO the borrower and not from them. Reverse Mortgages have no paymnets from the borrower.
The first option is a lump sum. This means basically that you take all of the available funds at the closing. This makes sense if you need all of the money right away.
The seocnd option is the monthly payment or tenure (or term) option. You will get a monthly check for as long as you live in the home (for the tenure option) or for a shorter period (specified term) if you want larger payments. This option is great if you are having trouble metting your financial obligations and want to feel secure with the increased monthly income. This option is not available for every product.
The third and most popular option is the Line of Credit (LOC). This means that the borrower gets a checkbook and can write checks as they need to. This is the most popular for a few reasons. The first reason is that interest only accrues on what you use and the LOC gives you the option of using the money when you want. The second reasn is that if the borrower is concerned with medicaid eligibility, this option offers the least amount of complications, as the funds never enter into your assets. (Speak to a qualified attorney about Medicaid eligibility.) The third and most important reason is that the unused portion of the LOC grows! This means that if you had $100,000 available and you did not use it this year, next year you would have about $105,000 available to you. It grows and compounds every year, giving you more available funds.
The best part about all of this is that you can change your payment option at any time and you can take any combination of the above options. For example, you could take several hundred dollars a month, $25,000 out at the closing and the rest as a line of credit.
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