With a line of credit, you get access to money as you need it without any obligation. You can decide when to draw upon your credit line and how much to take, as long as your balance is below the principal limit. You can’t be required to withdraw a minimum amount or to withdraw a minimum sum on a set schedule.
A line of credit provides a lot of flexibility. You can also leave the line untouched for years in anticipation of a day when you might need it. Basically, you can customize your withdrawals to your needs and adjust them as your needs change.
Growing Line of Credit Scenario
- Kathy Tobias, Age 63, and Rinaldi Tobias, Age 71 (reverse mortgages are calculated using the age of the youngest homeowner.)
- Home Value – $165,000
- Home Equity – $165,000
Kathy and Rinaldi would like to spend their retirement traveling around the U.S. in their RV, but don’t have extra money they would need to help pay for rising gas prices and other added travel expenses.
They take out a tax free* reverse mortgage of $82,419. This will give them an extra $519 per month which they can use any way they’d like, and more than supplements their need for gas and RV maintenance.
*Be sure to check with your accountant to verify current tax laws.
Note 1: Reverse Mortgage proceeds are based upon the current interest rates at the time the loan closes, the age of the youngest borrower, and the equity in the home. The examples above are based on an interest rate of 6.26%.
Note 2: Borrowers can lock rates in for 60 days from the date of application to the closing. All rates adjust weekly, and the rate for closing is determined by the weekly rate set on Tuesdays of each week (excluding Federal Holidays) and stay valid until the following Monday.