Have You Heard of the Growing Home Equity Line of Credit?
A reverse mortgage line of credit can be just what retirees need to provide security and peace of mind. ReverseMortgageDaily published an article indicating that "as the reverse mortgage industry continues to grapple with the 'loan of last resort' reputation, the line of credit feature may be the product's best bet in becoming a serious retirement planning tool in the eyes of retirees and the financial professionals working with them." A new strategy has been coined by the industry called a "standby reverse mortgage line of credit" in which a reverse mortgage is taken out in order to utilize its line of credit option.
A Home Equity Conversion Mortgage (HECM) line of credit gives borrowers a peace of mind in knowing that they have funds available, which can be used for anything at all and will never be reduced or closed by the lender (as long as the ongoing requirements for primary residence and timely payment of property charges are met). In fact, a HECM line of credit actually grows, which is another significant difference from a traditional Home Equity Line of Credit (HELOC). The growth is calculated on the initial amount placed in the line of credit and compounds over time based on the available running balance. In addition, the growth rate will adjust up or down based on mortgage interest rate fluctuations, so the upside of interest rates going up is that the growth rate on the line of credit will also go up allowing for more accumulation of available proceeds.
As stated in the article, "whether you access it or not, it still changes people's minds and gives them peace of mind knowing they have money that they can access in a short period of time if they need it." We in the industry are continuing to do our part in educating seniors and financial professionals about reverse mortgages, but it's up to the homeowner to do their part to understand the many ways that this tool can help.
For more information on reverse mortgages and other related topics contact:
Certified Reverse Mortgage Professional (CRMP)
NMLS# 473353
Toll Free (877) 500-0454
Local (702) 460-6222
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