What is a HECM line of credit?
A HECM (Home Equity Conversion Mortgage) line of credit is a feature of a reverse mortgage that allows you to borrow against your home equity as needed. The unused portion of your line of credit grows over time, increasing the funds available to you.
How does the line of credit growth feature work?
The unused portion of your HECM line of credit grows at a rate equal to the loan’s current interest rate plus the annual mortgage insurance premium (MIP) of 0.5%.
For example, if your loan interest rate is 5%, your unused credit line increases by 5% annually. Over time, compounding can significantly increase the total funds available.
Why is line of credit growth important?
The line of credit growth feature provides:
Flexibility:
Access more funds over time as your credit line grows.
Inflation protection:
The growth rate can help offset rising costs of living.
Financial security:
Creates a financial safety net for unexpected expenses or long-term needs.
What factors influence line of credit growth?
The growth of your line of credit depends on:
- ● The unused portion of your credit line.
- ● The interest rate applied to your loan.
- ● The length of time the funds remain unused.
The longer you leave your credit line unused, the more it will grow.
Can the line of credit grow even if my home’s value doesn’t?
Yes, the growth of your HECM line of credit is not tied to the value of your home. It grows based on the interest rate applied to the loan, regardless of market fluctuations or property values.
What happens if I don’t use my line of credit?
If you don’t use your HECM line of credit, the unused portion will continue to grow over time, increasing the amount available for future withdrawals. This provides greater financial flexibility as you age.
How does the line of credit growth compare to other options?
Unlike traditional HELOCs, which lack a growth feature, a HECM line of credit grows over time, offering increased financial flexibility without required monthly payments. A HECM line of credit offers:
- ● No required monthly payments.
- ● Growth of unused funds over time.
- ● Guaranteed access to funds as long as you meet loan terms.
Can I outlive my HECM line of credit?
No, your line of credit remains available for as long as you live in the home and fulfill loan requirements like paying property taxes and insurance.
How can South River Mortgage help?
At South River Mortgage, we help you understand how to maximize the benefits of a HECM line of credit. Use our Line of Credit Growth Calculator to estimate how much your available credit can grow, and speak with one of our experts to explore your options.
Line of Credit Growth Projection
Your line of credit will grow at 0% annually
| Year | Line of Credit Amount | Growth from Previous Year |
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Take Quiz >What is a HECM line of credit?
A HECM (Home Equity Conversion Mortgage) line of credit is a feature of a reverse mortgage that allows you to borrow against your home equity as needed. The unused portion of your line of credit grows over time, increasing the funds available to you.
How does the line of credit growth feature work?
The unused portion of your HECM line of credit grows at a rate equal to the loan’s current interest rate plus the annual mortgage insurance premium (MIP) of 0.5%.
For example, if your loan interest rate is 5%, your unused credit line increases by 5% annually. Over time, compounding can significantly increase the total funds available.
Why is line of credit growth important?
The line of credit growth feature provides:
- Flexibility: Access more funds over time as your credit line grows.
- Inflation protection: The growth rate can help offset rising costs of living.
- Financial security: Creates a financial safety net for unexpected expenses or long-term needs.
What factors influence line of credit growth?
The growth of your line of credit depends on:
- The unused portion of your credit line.
- The interest rate applied to your loan.
- The length of time the funds remain unused.
The longer you leave your credit line unused, the more it will grow.
Can the line of credit grow even if my home’s value doesn’t?
Yes, the growth of your HECM line of credit is not tied to the value of your home. It grows based on the interest rate applied to the loan, regardless of market fluctuations or property values.
How can I use my HECM line of credit?
You can use your HECM line of credit for any purpose, including:
- Covering medical or long-term care expenses.
- Home repairs or renovations.
- Paying off existing debt.
- Supplementing retirement income.
What happens if I don’t use my line of credit?
If you don’t use your HECM line of credit, the unused portion will continue to grow over time, increasing the amount available for future withdrawals. This provides greater financial flexibility as you age.
How does the line of credit growth compare to other options?
Unlike traditional HELOCs, which lack a growth feature, a HECM line of credit grows over time, offering increased financial flexibility without required monthly payments. A HECM line of credit offers:
- No required monthly payments.
- Growth of unused funds over time.
- Guaranteed access to funds as long as you meet loan terms.
Can I outlive my HECM line of credit?
No, your line of credit remains available for as long as you live in the home and fulfill loan requirements like paying property taxes and insurance.
How can South River Mortgage help?
At South River Mortgage, we help you understand how to maximize the benefits of a HECM line of credit. Use our Line of Credit Growth Calculator to estimate how much your available credit can grow, and speak with one of our experts to explore your options.