If you are over 62 and considering a HELOC you probably need to check out a
REVERSE MORTGAGE LINE OF CREDIT in Memphis.
Making positive strides within your financial plan is important. It is very important if you are reviewing your retirement plan or considering a Home Equity Line of Credit (HELOC). A local Memphis Reverse Mortgage lender form FirstBank, Chris Brundige, states that more often than not a Reverse Mortgage Line of Credit is a much better option for a retiree than a traditional HELOC. For senior borrowers in Memphis that are 62 and older, and seeking another means of long term financial stability, the reverse mortgage line of credit has several advantages over a traditional line of credit.
Chris stated that a lot of clients aren’t aware that they can structure their reverse mortgage as a line of credit?
“Most people who have seen the TV commercials think that getting a monthly payment or a lump sum are the only options that are available,” says Chris Brundige with FirstBank. For most clients, the Reverse Mortgage line of Credit makes a lot more sense.
Another question he is often asked: How does the Reverse Mortgage and the Reverse Mortgage Line of Credit work, and why is it a better alternative for a retiree?
First of all, a traditional HELOC requires that you make a payment each month. Usually that payment is interest-only for a set period of time. This means that when you make your payment none of the money goes towards the principle of the loan and the loan balance remains the same, unless you add extra money to the leads. Additionally, when you use more of your loan your monthly payment will go up further because you have a higher balance. Eventually people end up using all the money that is available to them,they now have the burden of a much higher payment than they started at, and there is no additional money to use. Then suddenly, the loan now requires a payment of principal and interest; resulting in a significantly higher required payment. At some point, you will have to pay off or refinance the loan (if you qualify) If you cannot afford to make the new payment or if you cannot qualify to refinance the loan then a foreclosure can happen.
Since a retiree is generally living on a fixed income, increasing payment amounts puts them in a worse financial situation as time goes on and could lead to tremendous financial strain at a time in their lives that they are unable to overcome it.
“Now let’s compare that to a Reverse Mortgage line of credit and I believe you will find out that it can be a much better alternative,” says Chris Brundige with Firstbank.
First, the Reverse Mortgage Line of Credit does not have a required payment that you must make monthly, regardless of the line of credits balance. If you would like to make a payment you certainly can at any time, but one is not required. As a matter of fact, many people choose to make some payments, when they want, even when not required.
Secondly, the Reverse Mortgage Line of Credit has a growth feature. Meaning that as time goes by the amount of money that you can use from it increases over time. This growth adds extra money that is available to you and increases your purchasing power. This generally offers a more flexible strategy for using home equity as part of your overall long term retirement plan.
Thirdly, the Reverse Mortgage Line of Credit is not due back until the borrower permanently leaves the home, sells it, passes away, or turns 150 years old so you never have to worry about a rising payment, having to requalify, or potentially being forced out of the home as long as you maintain the home in good repair, keep paying the taxes, insurance, and homeowners association dues and continue to reside in the property.
With FirstBank’s Reverse Mortgage Line of Credit in Memphis you can have access to some of the equity in the home, just like a traditional HELOC, but you get a whole lot more flexibility, increased purchasing power, and a lot of added protection that the HELOC cannot offer.
Below is an example of how a Reverse Mortgage Line of Credit could help:
Mr. and Mrs. Smith have a $300,000-dollar house in Memphis. They are both 62 years old and the house is paid for. They qualify for $150,000 Reverse mortgage line of credit and would like to receive $25,000 dollars up front to pay off a car loan, and some credit cards. The remaining $125,000 will grow at 1.25% more than the rate charged on the loan. Currently, you can get growth of around 5.7% on your reverse mortgage line of credit. At the end of the 3rd year if they have not used any additional money out of the line of credit they will have access to $150,000. At the end of the 5th year they would have access to $170,000 and so on and so forth.
The whole time they have not had to make a single payment on their loan saving them thousands of dollars of out of pocket payments that they would have made on a Traditional HELOC. Additionally, their purchasing power has gone up $45,000 dollars in just 5 short years. That’s why FirstBank recommends every senior homeowner, who is 62 and over, should consider a reverse mortgage with a line of credit as part of their financial plan.
Another benefit of the reverse mortgage line of credit would be if your home decreased in value because of a housing market slump, that change in value will not impact the line of credit’s growth, nor the additional purchasing power that it gives you. Therefore, the optimal strategy when getting a reverse mortgage line of credit, is to set it up as early as you can.The longer that you have it in place, the more it will grow. The more it grows, the more money that will be available when you need it.
Our Memphis reverse mortgage specialist at FirstBank, Chris Brundige would be pleased to assist you with any questions or to help you get started. Please call (901) 472-1301
or visit us at Reverse Mortgage Lenderintn.com to calculate your reverse mortgage.
6482 Poplar Ave