If you have answered the question, “What is a reverse mortgage in Richmond” and have made the decision to take out a reverse mortgage, you have several options as to how to receive the proceeds. Those options are: taking the full amount of money immediately at closing and no more after; receiving a fixed payment annuity over a period of time; a credit line against which you can withdraw at your convenience; a mixed bag of the annuity and credit line options.
Let‘s take a closer look at what is a reverse mortgage in Richmond options for payment.
Taking the full amount
If you opt to take the full allowable amount of the pot, there are some variables that first must be determined. The age of the borrower, the amount of value of the home, the amount (if any) of any underlying mortgage and the current interest rates are all factors that affect how much a homeowner can receive at once. In addition to that, there are upfront expense- origination fees, closing costs assessed by third parties, mortgage insurance and a set aside servicing fee that must be taken from the pot. Subtracting those amounts yields the Net Principal Limit (NPL). This is how much the borrower can take at closing.
Take a credit line
The most popular option for a reverse mortgage in Richmond is the line of credit. Borrowers take the total NPL and use much of it to pay debts, go on vacation, fix up the home, etc. They could use the remaining amount of it to help pay for a monthly payment, however it is usually it is held in reserve for future expenses. The amount of the line of credit that is unused grows at a rate that is the same as the rate the homeowner pays for the reverse mortgage.
Taking the monthly annuity payment
A third option for explaining what is a reverse mortgage in Richmond is the annuity payment plan. This option pays the borrower a fixed amount each month of a determined period of time. Whereas the line of credit offers maximum flexibility, a monthly annuity payment provides convenience and discipline. Make sure you know how much money you need each month for the period of time you commit to any one payment distribution.
Taking an ARM
There used to be two ARMS offered to borrowers, one where the rate of interest had a monthly adjustment and one that had an annual adjustment. Now, the annually adjusted ARM is no longer available. In its’ place, a fixed-rate HECM has emerged that proved to be very attractive. The downside to this option requires the full net principal balance to be drawn at once. You cannot have an annuity or a credit line.
Before you choose how to take your reverse mortgage money, it is best to make sure you know what is a reverse mortgage in Richmond . A reverse mortgage can be an incredibly powerful financial tool for seniors, but you should get all the facts from a mortgage company who can fully explain what is a reverse mortgage in Richmond.
