Deciding Between a Home Equity Line of Credit & a Reverse Mortgage.

by Robert Krepps on March 10, 2012

When I first started offering Reverse Mortgages over 8 years back, the programme was more high-priced; there was a once a month service charge of $25 – $35, there was also an origination charge of 2% of the assessed value , and there were only Adjustable Rate Homeloans available on the Federally insured HECM (Home Equity Conversion Mortgage).

Today, seniors have a seriously better option when selecting a Reverse Mortgage. The HECM programme no longer charges a once per month service charge, noreverse mortgageally there's no origination fee paid by the seniors, and there is now a Fixed Rate For Life available.

8 years back, I was sometimes asked if there had been a fixed rate option and that was disappointing to inform my clients that there had been not. I have found that many of the older generation feel much more Safe and Secure in a loan with a fixed rate. This provides assurance, you can plan for the future because you will know exactly what your costs as well as what your benefits will be 2, 5, or 20 years into the program.

In my view, the rationale somebody would choose a reverse mortgage over a noreverse mortgageal loan, or a home equity line of credit is the safety. Before the recent house emergency, I might have several seniors comparing the cost and benefit of a reverse mortgage to a HELOC. The HELOC is extraordinarily enticing because of the low costs and the sometimes low rates. Unfortunately many HELOC’s have only been available in adjustable rates that are liable to market fluctuations.

One of the most unsafe circumstances I see with HELOC’s is due to the fact that some seniors will need to use the cash out of the HELOC to make the payment on the HELOC once the payments get too high for them. When the housing market crashed and home values dropped many banks froze or canceled further cash allocations from the HELOC’s. This action caused seniors in this situation to lose their houses and their equity because they couldn't make the monthly payments.

This tragic situation could and would be evaded by utilizing a Reverse Mortgage instead. The nicest thing about a reverse mortgage is the safety and security. reverse mortgage’s can be gotten in Fixed rates or alterable rates. Fixed rates make allowances for a Lump Sum payment to the senior at closing.

Adaptable Rates allow for a lump sum payment, a warranted monthly payout for life, or a reverse mortgage Credit line (that can Not ever be frozen or cancelled due to the home market). All payouts are Federally insured by the FHA. At the end I suspect that if you weigh out both options most individuals will see that the reverse mortgage is the better option to safely and securely unlock the equity that is locked in your house.

Robert Krepps, from Security 1 Lending, provides reverse mortgages in Southern California. For full information on how the difference between a home equity line of credit and a reverse mortgage, visit or call 1-877-567-7476.

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