How may funds be withdrawn?

Reverse mortgage clients can be split into four categories:

1. Capital needs – gifting to children or grandchildren, one-off house renovations, holidays, new car, clear up other outstanding loans or expenses, etc. These people would typically require a lump sum.
2. Income needs – These people will withdraw money by instalments. The RBS product enables them to do this monthly over terms of between 5 and twenty years. They can either receive the same amount every month or opt for the option to increase this amount by 2.5% per year over the term. Use the calculator to work out the maximum that is available to the customer.
3. Occasional income needs – 3. Occasional income needs. These people seek the flexibility to be able to draw money when they need it, so a flexible drawdown facility is appropriate. This works like a line of credit, with no interest charged on the unutilized facility, with minimum drawdowns of $1,000.
4. A combination of these three.

By using an instalment borrowing a client is imitating an income stream type product. By borrowing a lump sum and then investing it into an income producing product the client may be worse off if the interest on the amount outstanding compounds at a faster rate than the level of income received, plus there is the potential to impact on their pension entitlements.

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