If you want the biggest HECM line of credit possible in the years to come, do you take it now or do you wait until you’re older?

I will assess this question for a 62 year old homeowner with a home currently worth $400,000 who currently has no need to withdraw funds from a HECM but wants the largest line of credit possible for the home. future – say in 3 years. I’ll call this owner Cautious. The data used to answer this question is based on the lowest loan prices on September 28, 2022 from any of the 8 HECM lenders that display their prices on my website.

An educated guess is that since Prudent does not need HECM funds immediately, she should wait until the need arises before making a trade. To wait is to grow old, which raises the line of credit. Also, in all likelihood, the value of his house will be higher, which will also increase the line. If interest rates are stable and the value of the house appreciates by 4% per year, which is the long-term average, the line of credit taken now will be worth $156,557 in 3 years, while the line taken after 3 years will be $157,970. The relevant data is presented in the tables below.

The downside of taking the line now rather than waiting 3 years is very small because a line of credit taken now and not used for 3 years will increase in size over that time. The line grows at a rate equal to the HECM loan rate plus the mortgage insurance premium.

If rates go up over the 3 years, the line available to Prudent after 3 years if she trades now will be larger while the line available to her if she waits 3 years to trade will be smaller. Assuming a 2% rate increase, for example, trading now will generate a line of $166,181 in 3 years, while waiting 3 years the line would drop to $111,169. The downside of waiting would be enormous.

The conclusion is very clear. Given the chaotic state of the markets today, the best time to take out a HECM Reverse Mortgage Line of Credit is now.

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