Reverse Mortgage Line of Credit Basics include:
- Your line of credit can be used for almost anything you’d like.
- No payment is needed on any amount you receive.
- The line of credit grows monthly.
- There are no tax consequences on the growth in your line.
- If you’d like, you can choose to pay the balance down.
Reverse Mortgage vs Home Equity Line of Credit (HELOC) - What's the Difference?
|Are monthly payments required?|
|No. Monthly payments are not required for the life of the loan.|
Yes (usually interest only). For an initial draw-down period, then payments increase to amortize loan balance.
|Is credit line growth guaranteed?|
|Yes. Undrawn credit line balance grows at the same rate charged on balance owed.||No. The credit line amount does not grow, and access to funds stop at the end of the initial withdrawal term.|
|Is there a mandatory payoff date?|
|No. Repayment is not required as long as any borrower continues to reside in the property, and the loan remains in good standing.||Yes. For the initial period, the borrower is paying interest only, then the loan balloons and payments increase dramatically.|
|Can my lender freeze/limit access to funds?|
|No. Funds can be accessed any time during the life of the loan, and lenders cannot freeze access to funds, as long as it is in good standing.||Yes. Access to funds is limited to the initial draw-down period, normally the first 7 to 10 years. Most HELOC's also enable lenders to freeze access with notice.|
|Can I (or my heirs) ever be held liable for more than the value of the home?|
|No. The balance owed can never exceed property value at the time of repayment.||Yes. Borrower(s) are personally liable for any deficiency plus legal collection and collection cost.|