When you take out a reverse mortgage, you are essentially opening up access to the money you’ve already invested in your home. After meeting the qualifications, your lender will assess your home and determine how much you can take out as a reverse mortgage using your home as collateral and then will offer you several ways to access that money.

Types of Reverse Mortgage Payments

A.  Lump Sum

The simplest of all reverse mortgage payment options is the lump sum plan. You can take out as much or as little as you qualify for in one big lump sum all at once. While some people like this form of payment, you will have to watch out to make sure you can handle the taxes you may be charged for taking out such a large sum of money at once. You will also need to check into whether taking out all your money at once will disqualify you for social services or government benefits.

B.  Line of Credit

If you choose to receive your reverse mortgage payments in the form of a line of credit, you’ll essentially be able to access as much or as little of the loan as you need at any particular time. You can withdraw cash any time you like without having to pay it back until the loan is flipped into repayment status. You will be charged interest on the amount of money you have taken out, but you won’t have to make monthly payments unless you want to. A line of credit allows you to borrow from yourself, paying only the interest charged. You can repay yourself or wait until the house sells at the end of the loan term (which is usually when the borrower either moves out of the home-and sells it or passes away). Line of credit payment plans offer versatility.

C.  Term Payments

If you choose the term payment option, you’ll receive set monthly payments for a set amount of time. You’ll get to choose how much and the length of the term to receive payments drawn off your mortgage.

D.  Modified Term

This final option is a combination of term payments and a line of credit.  You, the borrower, will determine how much of the loan should exist as a line of credit and how much of the loan should be paid out in monthly installments, and for what length of time.

E.  Tenure Payments

If you choose tenure payments, you will get regularly scheduled monthly payments. You’ll get these payments as long as you live in the home (or until the equity in the home has been used up).

F.  Modified Tenure

The modified tenure payment option is a combination of the line of credit and the tenure payment plans. You’ll sign up for regularly scheduled payments, but you’ll also have the option to withdraw chunks of cash whenever needed. The as-needed withdrawals will come from an established line of credit, and can be repaid or left to accrue interest until the loans flips into repayment status.

G.  Project-Specific Payment Plan

You may wish to look into a project-specific payment arrangement, especially if you’re planning on using some of the money from the reverse mortgage for home repairs.  Ask your lender if you would benefit from a “repair set aside”. You’ll need to get estimates for required home repairs, present those estimates to the lender while negotiating the parameters of the reverse mortgage payment plan, and then decide on one. The lender will “put aside” enough money to cover the estimates (usually 150% of what was estimated, just to make sure the costs are covered) and enough to pay for the expenses related to the repair administration fee. You, the borrower, are responsible for making sure the money set aside for the repairs is used exclusively for that purpose. Any home repairs made with reverse mortgage money qualify you for some tax benefits, so be sure to check with your accountant about those.

How Much Money Can You Take Out Through a Reverse Mortgage?

As you evaluate your reverse mortgage options, you’ll want to get a general idea of how much money you have available to you. You can get a preliminary estimate by using a reverse mortgage calculator. Realize you won’t have concrete numbers until you meet with a lender or credit counselor. Once you know how much you can expect to take out, you can begin evaluating payment options and make an informed decision.