Reverse Mortgage Line Of Credit – Advantage That It Grows!

line of credit growth rate money

Reverse Mortgage Line of Credit Growth Rate

The reverse mortgage has many great attributes, but maybe none greater than the line of credit growth rate. When deciding between which reverse mortgage program to choose it is inevitable that the term line of credit growth rate will be introduced into the conversation. Many times there is a silent pause on the other end of the phone as we mention it. You can hear the homeowners think to themselves, what is a line of credit growth rate?! This is completely understandable since the reverse mortgage program is the only mortgage that has a growth rate attached to the line of credit option.

 

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1.00%

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2.375%

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4.18%

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In this article we will quickly breakdown the line of credit growth rate, so that the benefits are easily understood, so the homeowner can make a more informed decision on the reverse mortgage they choose.

 

What is the reverse mortgage line of credit growth rate?

 

Simple, it is a line of credit that grows! It allows you to access more money on a monthly basis, because there is more money being applied to your line of credit on a monthly basis. This feature is currently only available with the adjustable rate reverse mortgage programs, because those are the only programs that offer the line of credit feature.

 

How does the reverse mortgage line of credit growth rate work?

 

Available money will be added monthly to your line of credit. The calculation of the amount that is being added depends on the current market rates and the current available balance of your line of credit. The rate of growth is based on the current interest rate. If rates go up then your line of credit growth rate will go up. If rates go down then your line of credit growth rate will go down. The rate of growth is directly connected to the interest rate on your reverse mortgage. That is a good thing, because they work in synchronicity making everything connected.

 

The actual growth rate equals the sum of the reverse mortgage programs index rate, margin and monthly mortgage insurance premium. It is easier than it sounds! See the example below.

 

Credit Line Growth Rate Example

Index LIBOR RateMarginMonthly MIPGROWTH RATE
2.92%1.00%.50%4.42%

(This table is an example of how the credit line growth rate is calculated. The LIBOR index rate, margin and monthly MIP may be subject to change. We encourage homeowners to contact us, so that you can review current information and what your reverse mortgage may look like.)

 

Every month that rate will be calculated against the current line of credit and amortized over a span of 12 months much like how an interest-only mortgage payment is calculated. That amount will be added to your line of credit every month, which you can draw on, or leave in to continue to grow exponentially.

 

Is the money being added to my reverse mortgage line of credit interest bearing like with a savings account?

 

No, the money being added to the reverse mortgage line of credit is not an interest bearing account. The best way to clarify this point that we hear quite often is that when you pull money out of the line of credit it is then added to your reverse mortgage loan balance. The growth rate of your line of credit is still part of the reverse mortgage loan. It is not making money, but it is offering homeowners the benefit of having access to more money without having to refinance!

 

Why is the line of credit growth rate such a great thing?

 

The reverse mortgage line of credit growth rate offers many amazing advantages that other mortgage products do not offer.

  1. Allows homeowners who choose a reverse mortgage line of credit program access to more and more money each month.
  2. Minimizes the need to refinance in some cases, because the line of credit is growing and adding value to the reverse mortgage as home prices may be increasing.
  3. More options when planning retirement. Even if a reverse mortgage may not seem like an immediate need, some homeowners start the program sooner to allow for the growth rate to build more available money when needed in the future.
  4. It doesn’t cost you anything for this additional feature. There is no monthly or annual fee if you do, or do not, use your line of credit.

 

The line of credit growth rate on the reverse mortgage is a smart tool for retirement! Each homeowner can choose how it best fits into their current situation and use it to their advantage.

 

If you would like more information on the line of credit growth rate or if you have any questions on the reverse mortgage program in general please do not hesitate to contact Good Day Reverse. We are here to make your reverse mortgage simple!

 

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Jason Heyl, is an experienced reverse mortgage advisor for Good Day Reverse, Inc. He is a reverse mortgage industry veteran with over a decade of experience. If you have any questions or comments on this article please let me know below. Thanks for reading. Have a Good Day!

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