Lump sum or monthly advances: which saves more?
Interest is only charged on money you've actually received. Taking a reverse mortgage as monthly advances instead of one lump sum can save a lot of interest, especially over 10 years or more. A lump sum makes sense when you need the money now, for example to pay off debt.
Interest saved with monthly advances—After 10 years
Monthly advance—
| After 10 years | Lump sum | Monthly advances |
|---|---|---|
| Owed | — | — |
| Interest | — | — |
Amount owed by year
Both options assume the same rate. Lenders may set a minimum amount for the first advance and for each regular advance, and the rate on scheduled advances can differ. Ask your agent which options each lender offers.
Questions about taking the money
Can I take part of the money now and the rest later?
Yes. Most lenders let you take an initial amount when the loan is set up, then regular or occasional advances after that, up to your approved limit.
Are the monthly advances taxable?
No. Reverse mortgage advances are loan money, not income, so they aren't taxed and don't affect Old Age Security or the Guaranteed Income Supplement.