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Reverse Mortgage Glossary

HECM Modified Tenure

HECM Modified TenureA HECM modified tenure plan is simply the combination of a tenure payment plan with a line of credit.

If you’re not family with the term “tenure”, it refers to monthly payments to you from a variable-rate HECM that are guaranteed for life, regardless of how many more years you live. Because tenure payments have the lifetime guarantee, it’s not unusual for them to be lower than what you might receive with a term payment plan.

Tenure payments are calculated on the assumption that you’ll live to age 99, but they’ll continue even if you live longer than that or use up all of the equity in your home. Even if you do use up your equity, don’t forget that the HECM is a non-recourse loan, which means that you are not on the hook if there’s not enough value in your home to settle the entire loan balance.

Note that a tenure or modified tenure plan is only available on the variable-rate HECM. The fixed-rate HECM offers just the lump sum payment option.

A HECM modified tenure payment plan can be a great way to structure a reverse mortgage because it offers a backup/emergency account in addition to the added income of the tenure payment. Even better, whatever you don’t use in the reverse mortgage line of credit will grow and compound over time based on a growth rate. The line of credit essentially turns a portion of your equity into a tax-free retirement account that grows and compounds with no limit.

Expert Tip

Planning ahead for your financial needs years from now can be a little daunting. Don’t feel like you’re locked into the payment plan you select now. It can be easily changed in the future with a simple phone call to your lender.

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