All About The Lump Sum Payout Option
The single-disbursement lump-sum payout option allows borrowers to receive their entire reverse mortgage proceeds in one large payment at the time of closing. This means there are no monthly disbursements or additional funds provided later. The single-disbursement lump-sum plan comes with a fixed interest rate.
This payout option can be ideal for borrowers who need a significant amount of money upfront to cover a large expense and do not anticipate needing additional funds in the future. For example, the lump sum can be used to pay off a high balance on a first mortgage. However, homeowners seeking regular monthly payments or the flexibility to borrow as needed might find other options more suitable. Alternatives include term payments, tenure payments, a line of credit, or a combination of term or tenure payments with a line of credit.
Lump Sum Scenario:
Bob, age 82, and Jill, age 79, (reverse mortgages are calculated using the age of the youngest homeowner.)
- Home Value: $375,000
- Home Equity: $375,000
The Challenge:
Bob and Jill both take medication to stay in good health. The cost of monthly meds and treatments makes it difficult for them to find the money needed to maintain the quality of life they once enjoyed.
The Solution:
They take out a tax free* reverse mortgage with the option of one lump sum totaling $218,419, or a monthly income of $1,495. The extra cash flow from their Reverse Mortgage more than covers their monthly cost for medication, and allows Bob and Jill more freedom with much less stress.
*Be sure to check with your accountant to verify current tax laws.
