A homeowner can pay off an existing mortgage, at closing receive $20,000, keep a line of credit of $50,000 and receive $500 a month for the rest of their life.
Lump Sum: All proceeds are distributed at closing and there is no more money made available. This is a great option for someone where most of the proceeds are being used to pay off the mortgage.
Line of Credit: After taking an initial lump sum or paying off an existing mortgage, the rest of the proceeds are set up in a line of credit with the mortgage lender. No interest is charged to the senior homeowner on money that is in the line of credit. Money that is left in the line of credit actually grows for the senior homeowner, making more money available to them over time. This feature helps a homeowner from outliving their money. Traditional lines of credit do not have this feature and many over the last couple of years have had their outstanding lines of credit reduced.
Monthly Payments: Tenure payments are a fixed amount of money that is paid to the senior homeowner for the duration of the loan. The payments will never run out as long as the senior abides by the reverse mortgage rules. Term, on the other hand, is a set number of payments that a senior homeowner will receive. The term can be for any period of time. The shorter the term the more money will be disbursed monthly. Term payments will always be greater than tenure payments.
Any combination of the three: Exactly as it sounds. Here is an example: