(LoanSafe.org) — To most, it is no secret that plans change. This philosophy of life can sometimes create drawbacks for some. Luckily for reverse mortgage borrowers, payout options can easily be changed, but usually at a cost for $20.

If your reverse is backed by the Department of Housing and Urban Development (HUD), choices for payments should include:

1. Lump Sum Disbursements

Keep in mind that single payments do not include all of the principal. Remember too that recent changes from HUD have made it so borrowers must create special funds for the mandatory borrower payments. With this option, HUD will disperse to the borrower 60% of the principal limit or the portion that will pay for the mandatory obligations such as property taxes, hazard insurance and mortgage insurance at closing.

2. Tenure

All this fancy name means is monthly payments. As long as you continue to reside in the property as a primary residence, you’ll be able to get your reverse mortgage funds through monthly payments. These payments are determined by the youngest age of the borrowers, the interest and the value of the home. Payments through tenure will of course be lower.

3. Fixed Terms

This specific term option will allow borrowers enjoy higher monthly payments for a fixed time period. Time periods may vary, but can be as much as 5 years.

4. Lines of Credit

As we’ve pointed out in the past, lines of credit with reverse mortgages are a way to grow your amount. Growth for this method occurs through a period where the interest rate is added to .5%. While payments can’t be reduced, cancelled or frozen as well with this option, the growth detail ensures that you’ll save more.

5. Modified Tenure

This option combines the option of tenure with a line of credit. Through this method, borrowers will be able to receive smaller monthly payouts while having instant access to their line of credit. There is also an option where homeowners can have a line of credit and get the higher monthly payments for their fixed period.

An important thing to keep in mind is that AARP has advised all potential mortgage borrowers to rethink going with the lump sum option, because of the risk of spending all the money in one place. It is indeed up to the borrower, but remember that it is also a literal reverse mortgage requirement to seek a financial adviser for counseling before making decisions as big as a reverse mortgage.


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