Line Of Credit

Reverse Mortgage Line of Credit Basics include:

  1. Your line of credit can be used for almost anything you’d like.
  2. No payment is needed on any amount you receive.
  3. The line of credit grows monthly.
  4. There are no tax consequences on the growth in your line.
  5. If you’d like, you can choose to pay the balance down.

Reverse Mortgage vs Home Equity Line of Credit (HELOC) – What’s the Difference?

Reverse Mortgage

HELOC
Are monthly payments required?
No. Monthly payments are not required for the life of the loan. Yes (usually interest only). For an initial draw-down period, then payments increase to amortize loan balance.
Is credit line growth guaranteed?
Yes. Undrawn credit line balance grows at the same rate charged on balance owed. No. The credit line amount does not grow, and access to funds stop at the end of the initial withdrawal term.
Is there a mandatory payoff date?
No. Repayment is not required as long as any borrower continues to reside in the property, and the loan remains in good standing. Yes. For the initial period, the borrower is paying interest only, then the loan balloons and payments increase dramatically.
Can my lender freeze/limit access to funds?
No. Funds can be accessed any time during the life of the loan, and lenders cannot freeze access to funds, as long as it is in good standing. Yes. Access to funds is limited to the initial draw-down period, normally the first 7 to 10 years. Most HELOC’s also enable lenders to freeze access with notice.
Can I (or my heirs) ever be held liable for more than the value of the home?
No. The balance owed can never exceed property value at the time of repayment. Yes. Borrower(s) are personally liable for any deficiency plus legal collection and collection cost.