Over the past decade we have assisted numerous reverse mortgage borrowers and have seen a pattern of how the funds are being used.  If you’ve read prior blogs on this type of home loan, you already know that funds from a reverse mortgage can be accessed in many ways. 

A report from 2021 resurfaced, that supports exactly what we have been seeing. Most reverse mortgage borrowers include setting up a Line of Credit that is available for them to access (if needed) at a later date.

According to the Federal Deposit Insurance Corporation, (FDIC), in 2021, over 90% of Home Equity Conversion Mortgage, (HECM), borrowers opted to take either part or all of their proceeds as a line of credit.  Source: US Department of Housing and Urban Development Annual Report 2021

An added benefit is that the borrowing power in the line of credit from a modern reverse mortgage can grow at the same rate as the interest, plus the annual mortgage insurance premium (MIP) charged to the loan (0.50% of the principal). Even if the borrower’s home decreases in value, the mortgage line of credit will continue to grow at the same rate. Since HUD guarantees HECMs, lenders may not reduce, revoke, or freeze the line of credit. 

We highly recommend speaking with a qualified advisor whenever considering any type of home financing or refinancing.