There are many options when it comes to borrowing money it can be difficult deciding which option is best for you and your financial needs. Many seniors consider using a line of credit to help supplement their needs in retirement. Let’s take a look at some of the popular line of credit options that are available.
Personal Line of Credit
A personal line of credit is similar to a credit card. You are given a maximum amount which you are able to borrow against and your payments are based on how much you borrow. The primary difference between a personal line of credit and a credit card is a personal line of credit will typically have a lower interest rate than a credit card. However, this can make a personal line of credit more difficult to get. Reverse Mortgage Lenders require more screening, including income verification and credit score*.
Home Equity Line of Credit
A Home Equity Line of Credit (HELOC) provides flexibility if you are uncertain what your expenses will be by providing you with a revolving line of credit, instead of one lump sum, that is for a specific period of time (loan term), you can borrow up to its maximum amount during the loan term. Lenders may offer loans with an adjustable or fixed interest rate. A HELOC uses your primary residence as collateral against the loan and the value of your home is one of the factors in deciding how much you can borrow.
Home Equity Conversion Mortgage Line of Credit
A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage, is a Federal Housing Administration (FHA) insured loan1 which enables you to access a portion of your home’s equity. With the adjustable-rate HECM loan you have the option of choosing to receive equal monthly payments, equal monthly payments for a fixed period of months, and the ability to draw on a line of credit at any time (and in any amount) until the line of credit is exhausted. A unique feature of the HECM line of credit is its growth rate. Unused funds in a HECM line of credit will grow over time2 allowing the homeowner more borrowing capacity without having to request a new credit increase.
If you have questions about the reverse mortgage line of credit option, call 1-800-976-6211 to speak with a licensed loan officer who can help provide you with the facts you need.
1As required by the Federal Housing Administration (FHA), you will be charged an up-front mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.
2 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.