To illustrate the impact of this growth feature, consider an applicant that took out an adjustable reverse mortgage at 2.75 percent, and left the entire $300,000 in the Line of Credit.
Growth on a $300,000 Line of Credit, after monthly compounding, would be 2.75 percent +1.25 percent = 4.00 percent. The schedule below shows the power of the compounded growth at various times in the life of the loan. Untapped, the available equity would be as follows:
5 yrs. = $366,29910 yrs. = $477,250
15 yrs. = $546,090
20 yrs. = $666,775
30 yrs. = $994,049
The equity line grows and is available for use by the borrower regardless of the current value of the home. This feature provides a valuable hedge against value fluctuations in our real estate market as well as economic downturns.
Lastly, any payments, such as interest or principal, on the reverse mortgage go dollar-for-dollar to increase the available Line of Credit. Therefore, borrowers who elect to pay some or all of their annual interest expense on the mortgage will see their LOC grow by the amount of the payment as well as reduce their outstanding loan balance by that same amount.
All in all the LOC option is a great feature that can help borrowers be more secure in their financial future.
Article Source: http://EzineArticles.com/8106081
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