Poor Credit Loans Payment Options
You know how lottery winners get to choose whether they want their money in installments or one lump sum? Well you may feel like you won the lottery when you decide how you want your reverse mortgage funds to arrive. Each loan has its own set of payment options (that’s payment to you, from the lender). Listed here are the main payment options, along with which loans offer them. As you read down the list, think about which one would fit best in your lifestyle.
Tenure (HECM and Home Keeper): If you like the security of having stable, steady monthly checks deposited in your bank account, monthly tenure payments may be for you. The biggest advantage of this option is that no matter how long you have the loan (stay in your home), the lender continues to pay you — even if you’ve gone beyond what the lender originally agreed to lend you, and even if you live 30 years longer than anyone expected. The downside is that fixed monthly payments don’t allow for sudden large expenses and don’t adjust for inflation down the road.
Term (HECM and Home Keeper): A monthly term payment has the security of getting equal monthly checks like the tenure plan, but you decide how long you continue to receive payments. The shorter the term, the more money you get per check. For example, if a lender sets your principal at $100,000 and you want to receive it over eight years, that’s about $1,041 per month. If you decide instead to get your payments over five years, you’re looking at $1,666 per month. That’s a sizeable difference! But remember, once that term is over, you’re out of money.
Lump sum (HECM, Home Keeper, and one Cash Account option): Have you always dreamed of rolling around on a pile of money? Choosing a lump sum means you get the entire amount of the loan in one big check. It’s up to you how you want to budget it per month, and it’s up to you to make sure it lasts as long as you plan to live in your home. If you have a very large expense that you absolutely must pay in full, a lump sum could do the trick, although a better option is often a line of credit (see the next bullet).
Line of credit (HECM, Home Keeper, Cash Account): A line of credit (also called a credit line) works very much like a savings account. You have access to the entire loan amount, but since you have to send in a form to get it, people are often more mindful of how their money is spent than they may be with a lump sum. In addition, depending on the loan, you can earn interest on the money you haven’t yet borrowed.
Combination (HECM and Home Keeper): Can’t decide? Maybe a combination of payment options is your best bet. You can choose how much you want to receive upfront (through a lump sum, line of credit, or both) and designate the rest to a monthly payment. Or work backward — figure out how much you need per month, multiply that by the number of months you expect to stay in your home, and leave the rest in a line of credit. The combinations are virtually endless because they’re tailor-made for you.
Tenure (HECM and Home Keeper): If you like the security of having stable, steady monthly checks deposited in your bank account, monthly tenure payments may be for you. The biggest advantage of this option is that no matter how long you have the loan (stay in your home), the lender continues to pay you — even if you’ve gone beyond what the lender originally agreed to lend you, and even if you live 30 years longer than anyone expected. The downside is that fixed monthly payments don’t allow for sudden large expenses and don’t adjust for inflation down the road.
Term (HECM and Home Keeper): A monthly term payment has the security of getting equal monthly checks like the tenure plan, but you decide how long you continue to receive payments. The shorter the term, the more money you get per check. For example, if a lender sets your principal at $100,000 and you want to receive it over eight years, that’s about $1,041 per month. If you decide instead to get your payments over five years, you’re looking at $1,666 per month. That’s a sizeable difference! But remember, once that term is over, you’re out of money.
Lump sum (HECM, Home Keeper, and one Cash Account option): Have you always dreamed of rolling around on a pile of money? Choosing a lump sum means you get the entire amount of the loan in one big check. It’s up to you how you want to budget it per month, and it’s up to you to make sure it lasts as long as you plan to live in your home. If you have a very large expense that you absolutely must pay in full, a lump sum could do the trick, although a better option is often a line of credit (see the next bullet).
Line of credit (HECM, Home Keeper, Cash Account): A line of credit (also called a credit line) works very much like a savings account. You have access to the entire loan amount, but since you have to send in a form to get it, people are often more mindful of how their money is spent than they may be with a lump sum. In addition, depending on the loan, you can earn interest on the money you haven’t yet borrowed.
Combination (HECM and Home Keeper): Can’t decide? Maybe a combination of payment options is your best bet. You can choose how much you want to receive upfront (through a lump sum, line of credit, or both) and designate the rest to a monthly payment. Or work backward — figure out how much you need per month, multiply that by the number of months you expect to stay in your home, and leave the rest in a line of credit. The combinations are virtually endless because they’re tailor-made for you.
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