Comparing Bank HELOC to HECM Reverse Mortgage

Accessing Your Home’s Equity Comparing Reverse Mortgage toHome Equity Line of Credit
Reverse Mortgage Home Equity Line of Credit
Grid uses appraised value and age of youngest borrower $100,000.00, age 70 $100,000.00, age not relevant
This grid uses Interest rates, HELOC as offered by Fifth Third Bank & HECM loan details as of 10/18/2013. Principal residences only Both loans providing 120 months of payment to borrowers, grid assuming RM paid in full at end of 10 years while HELOC is due to be paid or refinanced at end of 10 years
Credit Score & Employment history Not used for underwriting approval Minimum credit score required is 650, best interest rate requires >750 credit score. Required to have 2 years in same/similar employment.
Total Debt to income ratio Not used in underwriting approval.RM does require residual income, $448 per month single, $778 for 2 borrowers in Ohio or a property charges escrow at 1.2 times life expectancy required <45%Income must be stable, continuing and sufficient
Loan to appraised value requiredLTV required Not Relevant. RM makes funding available as a % of appraised value. Older the youngest borrower, or the lower the interest rate, the more funding is available, <80% LTV
Interest Rates 1 month adjustable3.00% margin plus index of 1 month LIBOR of .174% plus 1.25% monthly FHA MIP For a total initial rate of 4.375 adjusted monthly Adjustable interest rate based upon prime rate,( currently 3.25%), plus or minus adjustment based upon credit score for total rates of 2.99% to 4.24%
Total funding available $54,200at age 70 with above rates and home appraised at $100k $66,600 line of credit requested
Monthly interest payment 0/None due Interest only on loan balance, minimum interest payment accepted $35. At 4% interest over 10 year period, interest paid $27,4556 over 10 years, monthly $228.80 interest charge due
No one can predict future interest rates but both loans involve the prime rate which has not been adjusted from current levels for 7 plus years Rise in prime rate would increase loan balance due at life event but amount of initial funding set at close. Increase in interest rate would increase funding available in line of credit HELOC lowers credit score as they are a form of revolving credit, contain the possibility of serious interest rate risk and consequent large rise in monthly interest charges