Blog Series: Reverse Mortgage Payouts (Term Payment)
If you’re a senior citizen, there are times you you may require extra income for a specific period of time. This income could be for unexpectedly needing several months of physical therapy, or to take up a new hobby such as golf lessons.
Regardless of why you need this extra income, it can be obtained through a reverse mortgage term payment. In contrast to the the line of credit and tenure payment methods discussed in our previous two blog posts, term payments have unique benefits and limitations.
Term payments are fixed monthly payments for a specific timeframe
Unlike a reverse mortgage tenure payment which lasts for as long as you are in the home, you could receive a tenure payment of $6,000 per month for a specific number of years.
This was able to help Frank and Angela, a retired couple in Kansas City who had paid off their mortgage a decade ago. Angela needed round-the-clock healthcare and wanted to remain at home rather than move into a care facility. The cost of the in home care was $6,000 per month, so Frank and Angela received a $6,000 monthly term payment for two years and Angela was able to continue living at home.
Reverse mortgage term payments are often larger than tenure payments
Compared with tenure payment plans, your maximum monthly term payment is generally higher.
This is because term payments are mathematically determined based on your home’s value, which means there’s a finite amount of money (and specific length of time) you can use term payments.
Tenure payments will continue as long as you live in the home, even if the amount you’ve borrowed exceeds your home value.
With term payments, although you won’t receive additional monthly payments after you reach the end of the loan term, you can keep living in the home as your principal residence until you pass away or move (as long as you continue to meet the other loan conditions, including paying your property taxes, HOA fees and maintaining your home).
We hope this blog series has shown you how reverse mortgage payouts can provide a wide range of financial benefits. If you want to learn more about term payments or have questions about reverse mortgages, contact one of Open Mortgage’s friendly loan originators today!
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