Make payments with a reverse mortgage?

Most homeowners use reverse mortgages to eliminate required monthly principal and interest payments, improving cash flow for retirees on fixed incomes. The federally insured Home Equity Conversion Mortgage (HECM) is widely used for this purpose. Many homeowners assume reverse mortgages only allow balances to grow, but adjustable-rate HECMs allow partial prepayments at any time without penalty. Consistent voluntary payments at the same interest rate over the same time period can amortize the loan similarly to a traditional forward mortgage, shrinking the balance instead of growing it. Voluntary payments on an adjustable-rate HECM generally decrease the loan balance, increase home equity, and increase the available line of credit dollar-for-dollar, restoring borrowing capacity and liquidity.

"Most homeowners who obtain a reverse mortgage do it for one primary reason: to eliminate the required monthly principal and interest mortgage payment. And that makes perfect sense. For retirees living on a fixed income, removing a large monthly obligation can dramatically improve cash flow, reduce stress and create more flexibility during retirement. In fact, that payment elimination feature is one of the biggest reasons the federally insured Home Equity Conversion Mortgage (HECM) has become such a powerful retirement planning tool."

"But here's what many homeowners never realize: The most common reverse mortgage product, the adjustable-rate HECM, has multiple advantages when making payments. Not required payments, but VOLUNTARY payments. Most people assume a reverse mortgage works like a one-way street: once the loan balance starts growing, there's no turning back. But that's not true. With an adjustable-rate HECM, borrowers can make what are known as partial prepayments at any time without penalty."

"And if those payments are made consistently, using the same interest rate, over the same time period, the reverse mortgage will amortize very similarly to a traditional forward mortgage. In other words, the loan balance would shrink instead of grow. But unlike a traditional mortgage, the HECM offers two enormous advantages that many homeowners and even financial professionals overlook. This is where the HECM becomes truly unique."

"When borrowers make payments toward an adjustable-rate HECM, three things generally happen simultaneously: The loan balance decreases Home equity increases The available line of credit increases dollar-for-dollar That last point is critical. With a traditional mortgage, payments simply reduce debt. The money is gone. There is no future access to it unless the homeowner refinances or applies for a new loan. With the adjustable-rate HECM, voluntary prepayments restore borrowing capacity. That means liquidity increases every time a payment is mad"

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