Payment
plans and calculations for Home Equity Conversion Mortgage (HECM)
Q: What types of payment plans are available with the HECM loan?
A: In most states, a borrower with a HECM may choose among five payment
plans: term, tenure, modified term, modified tenure, and a line of credit. You
may change payment plans at any time and as often as you like for a small fee.
1) Term option: You will receive equal monthly payments for a fixed
period of time selected by you.
2) Tenure option: You will receive equal monthly payments for as long as
you occupy your home as a principal residence.
3) Line of Credit option: You may draw up to a maximum amount of cash at
times and in amounts of your choosing, as long as you occupy your home as a
principal residence. (Option not available in Texas.)
4) Modified Tenure Plan: Allows you to set aside a portion of loan
proceeds as a line of credit and receive the rest in the form of equal monthly
payments as long as you occupy your home as a principal residence.
5) Modified Term Plan: Allows you to set aside a portion of loan
proceeds as a line of credit and receive the balance as equal monthly payments
for a fixed time period as specified by you.
If you select either of the term plans, you can remain in your home
after the end of the loan term without starting repayment. The same is true if
you have withdrawn the maximum amount under a line of credit. Under the tenure
payment plan, you will continue to receive monthly payments and need not repay
your loan as long as you continue to use your home as your principal residence.
Remember that repayment of a HECM does not begin until you no longer occupy
your home as your principal residence.
Q: How will the amount of the reverse mortgage proceeds be
calculated?
A: How much you can receive in a lump sum, line of credit or monthly
payments depends on the age of the youngest borrower, the current expected
interest rate and the Maximum Claim Amount defined above. The older you are,
the larger your payments are likely to be. The following example shows the
funds available:
Age
Monthly Income
$175,000
$250,000
$312,895
65
$554
$811
$1,026
75
$727
$1,059
$1,337
85
$1,094
$1,584
$1,995
Lump Sum or Line Of Credit Option:
Age
Lump Sum / Credit Line
65
$81,161
$125,711
$170,261
75
$94,892
$145,967
$197,042
85
$109,798
$167,698
$225,598
These HECM examples are based on home values in maximum lending
limit areas based on current expected interest rates as of 02/08/2005.
