Reverse Mortgage Line Of Credit
A reverse mortgage line of credit lets you draw from your HECM when you choose, in the amounts you choose. It is offered only on an adjustable-rate HECM, and every borrower must be at least 62 at closing.
Quick answer
Saxton Mortgage does. At least one HECM program we offer includes a line of credit on its variable-rate HECM, either alone or paired with set payments as a Modified Term or Modified Tenure plan. The fixed-rate HECM pays a single lump sum at closing and has no line of credit. What you can draw at closing and during the first 12 months is capped by HUD’s initial disbursement limit.
How the line of credit works
Each item below is an FHA rule for HECMs or a requirement of our reverse mortgage program.
- The line of credit is available only on an adjustable-rate HECM. A fixed-rate HECM pays a single lump sum at closing.
- You take money at times and in amounts you choose. The lender cannot require any draw to be above a minimum amount.
- On an adjustable-rate HECM, your Principal Limit, the most the HECM can pay out, increases each month.
- During the first 12 months, your total draws cannot go over the Initial Disbursement Limit. The servicer tracks every draw to keep you within it.
- You set your first-year draw election at closing. You cannot raise or lower it after closing.
- Once you request a draw, the servicer must pay it within five business days or owe you a late charge and interest.
Draw when you need it
Adjustable rate only
Your limit increases monthly
First-year draws are capped
Combine it with set payments
Change plans later
How Does A Reverse Mortgage Line Of Credit Work?
It is one of the payment plans on an adjustable-rate HECM. You receive money at times and in amounts you choose.
FHA gives HECM borrowers six payment plans for how loan proceeds are paid out. The line of credit is one of them, and it is available only on an adjustable-rate HECM. A fixed-rate HECM is limited to a single lump sum at closing, with no future draws apart from set-aside funds, so it has no line of credit. Our reverse mortgage program offers the fixed-rate HECM only as a lump sum at closing.
Your Principal Limit is the most you can receive from the HECM. It takes into account the age of the youngest borrower or eligible non-borrowing spouse, among other factors. On an adjustable-rate HECM, the Principal Limit increases each month. Money set aside at closing, such as for servicing fees, repairs after closing or property charges, is subtracted from the Principal Limit and reduces what you can draw. Set-aside funds stay part of your HECM proceeds and are added to your loan balance only when they are paid out.
In the first 12 months there is a cap on how much you can take, called the Initial Disbursement Limit. It covers closing and the first 12 months only. You tell the lender at closing how much you plan to draw or leave available during that first year, and you cannot raise or lower that choice after closing. Later on, you can change to a different payment plan as long as funds are available. See our reverse mortgage page.
Why choose Saxton for a reverse mortgage line of credit
This page is for homeowners 62 or older, and their adult children, who want access to home equity without taking it all at once.
Draw On Your Schedule
You choose when to draw and how much.
Pair It With Set Payments
Modified tenure and modified term split your proceeds between a line of credit and equal payments each month.
Switch Plans Later
On an adjustable-rate HECM, you can change payment plans at any time as long as funds are available, and the lender may charge a fee.
Prepay Without Penalty
You can prepay the loan in whole or in part without penalty. On an adjustable-rate HECM, a partial prepayment can set up or increase a line of credit.
Pay Property Charges From It
If the lender does not require a life expectancy set-aside, you can choose to have property charges paid from your line of credit. You cannot cancel that choice later, and if your HECM proceeds run short you must pay the charges yourself.
A Non-Recourse Loan
The HECM is non-recourse. You or your estate will never owe more than the loan balance or the home’s value, whichever is less, and no assets other than the home must be used to repay the debt.
Hear From Homeowners Like You
Frequently Asked Questions
Straight answers about the reverse mortgage line of credit.
Saxton Mortgage does. At least one HECM program we offer includes a line of credit on its variable-rate HECM, either alone or paired with set payments as a Modified Term or Modified Tenure plan. The fixed-rate HECM pays a single lump sum at closing and has no line of credit. What you can draw at closing and during the first 12 months is capped by HUD’s initial disbursement limit.
No. FHA makes the line of credit available only on adjustable-rate HECMs. A fixed-rate HECM pays a single lump sum at closing, with no future draws apart from set-aside funds. A partial prepayment on a fixed-rate HECM does not free up new funds either.
There is a first-year cap called the Initial Disbursement Limit. It is generally the greater of 60 percent of the Principal Limit, or your Mandatory Obligations plus 10 percent of the Principal Limit. Mandatory Obligations are the required fees and charges paid at closing or during the first 12 months. The cap can be lower when a life expectancy set-aside or servicing fee set-aside applies. Room on your line that you do not take at closing still counts toward the cap.
No. At closing you tell the lender how much of the Principal Limit beyond your Mandatory Obligations you will draw, or leave available, during the first 12 months. You cannot increase or decrease that election after closing.
Yes. With modified tenure, you set aside part of your Principal Limit as a line of credit and receive the rest in equal payments each month. Modified term works the same way, except the payments run for a term of months you pick. Both are available only on adjustable-rate HECMs.
On an adjustable-rate HECM, you can change to another payment plan at any time, as long as funds are available. You can ask for a change at any point in the life of the loan unless you chose a lump sum at closing. The lender may charge a fee for the change. The servicer must send you the new terms within five business days of your request and complete the change within five business days of receiving your signed plan.
On an adjustable-rate HECM, the Principal Limit increases each month. Set-asides reduce what is available to draw. If you make a partial prepayment and do not say where it should go, it is applied to your existing line of credit or used to create a new one.
You stay responsible for property charges, including property taxes, hazard insurance, flood insurance if it applies, ground rents, homeowners association or condominium fees and special assessments. If your HECM proceeds run short, you must pay these charges yourself. With HUD’s approval, the loan can become due and payable if no surviving borrower lives in the home as a principal residence, or if a borrower obligation under the HECM is not met. It becomes due and payable automatically in other cases, such as when a borrower has died, no surviving borrower lives in the home and no deferral period applies, or when a borrower transfers all of their title to the home and no other borrower keeps title.
Find out what you qualify for
Tell us about your home and how you would like to use your equity, and we will walk you through how a line of credit could fit.
Get Pre-Qualified- U.S. Department of Housing and Urban Development, FHA and housing resources
- U.S. Department of Housing and Urban Development, FHA mortgage insurance premiums
Loan amounts, rates, terms, and eligibility are subject to credit approval, asset and income verification, appraisal, and program guidelines. Program availability varies by state. Not all applicants will qualify. Saxton Mortgage, LLC is an Equal Housing Lender.