Reverse Mortgage Glossary
Term payments distribute the proceeds from a variable-rate HECM in the form of a monthly paycheck that is guaranteed for a certain period of time or payment amount. Unlike tenure, term payments do not come with a lifetime guarantee, so there’s a risk they could run out at some point. However, they can often be a much larger monthly amount than what would be available with a tenure payment plan.
The advantage of term payments is that they give you more flexibility to set the exact dollar amount or length of time that you would like the payments to come in. Tenure payments are calculated only based on the assumption that you’ll live to the age of 99, but they’re guaranteed to continue if you live longer than that.
You can select to receive 100% of the proceeds in the form of term payments or take term along with some combination of lump sum or line of credit. This is one of the reasons the HECM can be a powerful financial tool; it can be customized to best suit your financial goals and situation.
Note that the fixed-rate HECM only offers the option of taking the proceeds as a lump sum. No term payment option is available.
Picking the right payment plan can be a little intimidating whether you’re considering tenure or a term option. Note that you’re not locked for the rest of your life into the payment plan you select now. The HECM reverse mortgage can change with your needs, so if you need to restructure your payments or take out a lump sum, you can do that with a phone call to your lender.