6 ways to receive your payouts from an adjustable-rate reverse mortgage loan


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While the majority of traditional mortgage borrowers choose a fixed-rate loan, the opposite is true for most reverse mortgage loan borrowers, who prefer the flexibility of an adjustable rate for their loan.

Gregg Smith, president and COO of One Reverse Mortgage in San Diego, says that 90 percent of his customers opt for adjustable-rate reverse mortgage loans.

Reverse mortgage loan payments are made by the lender to the borrower, so even if interest rates rise, there won’t be an immediate negative impact to the homeowners.

However, interest on the amount of your line of credit that you use accumulates and must be repaid with the loan balance when you sell your home (as well as if the home no longer serves as your primary residence for 12 months or more or if all the owners die). A higher interest rate will increase the eventual repayment amount.

“While a fixed-rate reverse mortgage offers only a lump-sum payment, an adjustable-rate reverse mortgage offers the flexibility of numerous ways borrowers can receive their payments, says Lyn Coffin, a certified reverse mortgage professional with Mortgage Network in Danvers, Massachusetts.

Reverse mortgage customers can choose between six payment options for their loan.

“Customers can change their payment option at any time and change it multiple times as their circumstances change,” says Paul Fiore, executive vice president of retail sales with American Advisors Group in Orange, California.