Maximize your borrowing power on a HECM loan

How, when and why to take a reverse mortgage

Editor's note: This is the second in a multipart series. Read Part 1. The first article in this series looked at the various reasons many Home Equity Conversion Mortgage (HECM) borrowers make bad choices. One important reason is that they don't fully understand the longer-run consequences of the various HECM options that are available. That is the subject of this article. The senior's borrowing power The different HECM payment options can be viewed as different ways that seniors can use the borrowing power of their homes. Total borrowing power depends on the property value, the age of the youngest co-borrower, and the expected interest rate and upfront fees on the HECM. The senior can use her borrowing power to withdraw cash, purchase an annuity, reserve a credit line that grows larger as long as it is not used, or some combination of the three. Using all borrowing power upfront Table 1 shows the maximum amounts that a 72-year-old with a $400,000 house can draw using her f...