HECM Disbursement Options

Individuals who choose an FHA insured, Home Equity Conversion mortgage (HECM) may access the proceeds in several ways. For more information on each, click on the headings.

Through the “tenure” option, a reverse mortgage borrower may elect to have equal monthly payments deposited into their bank account for as long as the individual lives in the home. The amount available varies based on the age of the borrower and the value of the home. Many older Americans utilize tenure payments to supplement their retirement income with tax-free, reverse mortgage proceeds.

The “term” option pays the recipient of a reverse mortgage equal monthly payments for a set period of time. The period and payment amount is set by the borrower but the total amount withdrawn cannot exceed the “gross benefit” (the total proceeds of the loan). Many people choose this option to provide additional tax-free income for an amount of time they can control.

Many reverse mortgage borrowers elect to receive all or some their loan proceeds in a lump sum check at closing through the “lump sum” option. Like all disbursement options, the amount available depends on the borrower’s age and the value of the home. There are no restrictions on the use of the funds and the money received is not taxed as income.

The “line of credit” option allows individuals to access their reverse mortgage proceeds whenever they choose. Interest does not accumulate on the line of credit until funds are withdrawn. The borrower may access the money at any time and for any reason. Federally insured HECM reverse mortgages have a feature through which the available line of credit grows over time at a rate equal to the loan’s interest rate plus 1%.

The modified term and modified tenure option is a combination of a monthly payment and a line of credit. This option is used to provide some monthly income while still having access to additional proceeds when needed.

To get your free reverse mortgage FROG report, click here or call 866-508-HECM.