It has been said that compound growth is the most powerful force in the universe. Case in point, if a 16 year old today puts $2,000 away in a ROTH IRA until age 21 and lets it earn 9.4% interest annually (average stock market gain since 1926) this person would retire with over $1,000,000. That is an amazing return on $10,000 of initial investment. You aren’t 16 any longer, but you can still get stable, guaranteed growth with a reverse mortgage line of credit no matter what happens to your home value.
A reverse mortgage allows homeowners 62 and older to leave the money they qualify for in a line of credit (RM-LOC) that grows every year based on the amount left in it and the credit line growth rate. The current growth rate is at 4.453% on HECM Annual with 3.203% initial interest rate, 1.25% MI and $9,958 in total fees, some of which are refundable on sale or refinance of home.
Based on a borrower 62 years old and a home value of $400,000 the initial RM Line of Credit available would be $199,331. This amount grows every year based on the growth rate and the amount left in the LOC (if interest rates rise, the growth rates rises equally or drops the same amount if rates drop). The best thing about it is this amount is guaranteed by the FHA no matter what happens to your home value in the future; your RM-LOC can never be frozen or taken away like traditional Line of Credits were taken away during the last recession. Reverse Mortgage Lines of Credit are the guaranteed, safe option for homeowners.
Assuming interest rates don’t lower, the amount available on a RM-LOC will be:
End of Year 1: $211,531
End of Year 5: $268,266
End of Year 10: $361,042
End of Year 15: $485,902
End of Year 20: $653,944
End of Year 26: $933,964
End of Year 30: $1,184,468
This is not an inflated projection, in fact, if rates were to rise in the future, your growth rate would raise the same amount and these numbers would be even higher. This is the compound growth that will work for you IF you start early (age 62) and leave your money in a reverse mortgage line of credit. Interest would only be charged on the initial fees of the $9,958; and any funds withdrawn. To see what your scenario would be, call us today at (877) 567-7476 or check it yourself with our reverse mortgage calculator here.