A Line of Credit Alternative


by David D. Holland



A traditional Home Equity Line of Credit (HELOC) is a popular option for many homeowners. If you are aged 62 or older, however, and have equity in your primary residence, you might be eligible for a Reverse Mortgage Loan Line of Credit. I call these “REVLOCs” because they are a type of reverse mortgage loan. There are a few notable advantages of REVLOCs, some of which I’ll highlight here.


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If the REVLOC remains unused, the available balance will continue to grow monthly. For a financial “safety net,” let’s say a couple has a home worth $225,000 and they establish a $100,000 REVLOC at age 62. If they don’t draw on it, the line could increase to over $250,000 by the time they turn 78 (assuming today’s rates). If one of them needs nursing home care, for example, the line of credit can be drawn from without the obligation to pay monthly interest and principal (as long as one of the two lives in, and maintains, the home). Also, 1. The future value of their home doesn’t affect the amount that can be borrowed; 2. It’s possible the line of credit could eventually exceed the value of the home; 3. The line can continue to increase even if the value of the home decreases. You don’t see that with a regular Home Equity Line of Credit!


Pay Back.
With a REVLOC, the “pay back” of what is owed to the lender comes due when the last spouse leaves the home or you decide to sell the house. A traditional line of credit requires monthly debt payments.


Non-recourse means the loan is secured by collateral only (in this case, your primary residence). So, even if the debt eventually surpasses the home’s worth, you and your heirs are not personally responsible for the excess debt. A REVLOC is “non-recourse,” a HELOC may not be.


If you are over age 62, with sufficient equity in your home, and the ability to pay property taxes, insurance, and home maintenance, the Reverse Mortgage Loan Line of Credit is worth a serious look. To learn more about this type of loan, including costs and requirements, you can call my Reverse Mortgage Director, Mike Peerless (NMLS #1073735). He’ll be happy to answer all your questions!


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