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Business Real Estate Using Reverse Mortgage Cash Out Options Wisely
Business Real Estate Using Reverse Mortgage Cash Out Options Wisely
| Using Reverse Mortgage Cash Out Options Wisely |
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| Written by Mulroony Vanrock |
| Thursday, 15 January 2009 09:07 |
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I had an senior reverse mortgage prospect contact me last Tuesday. He claimed his property was worth a certain amount and wanted to know how much money we would lend him. I tell him and he's ready to go. Now his plan is take the entire amount, I believe about $134,000, put it in the bank and live off of it while its gaining interest with his bank. I say, "slow down there partner, I don't think this is your best choice". He has a very typical reverse mortgage need. That is the need for additional funds to cover life expenses. His home is owned free and clear. All he needs is an occasional draw of some kind to get him through. He is not extravagant in any way. For reverse mortgages borrowers have four ways to draw upon the money alots them. My guy on the phone chose the one most likely to hurt his financial situation. My borrower has these four options: The first is simply to do as he wants and take a large lump sum. The lender will set a maximum cash out amount. The borrower can take this amount or a portion thereof out at any time. Number 2 is for the borrower to receive a monthly payment. The borrower may determine the amount, which may have an end date when the money runs out, or the bank may set a number which lasts in perpetuity. The 3rd choice is to opt for a line of credit. In this circumstance the lender allows the borrower to pull money out on an as needed basis. Unused money does not accrue interest against the home's value. For this reason this third option is a very popular choice. An important point about the line of credit is the unused portion of the line is actually accruing interest for the borrower increasing the line of credit over time. The last option is a combination of the forementioned options. Going back to my lump sum borrower it is pretty clear he is much better off without the lump sum as he doesn't need all that money, and interest would be eating away at his equity using that choice. He was better off with some for of monthly draw combined with a line of credit. Different choices exist because we all have unique situations. About the Author: Kindly provided by MoneyHunter.org You are welcome to use this article on your own website, if you include the link just before this text. |
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