With an adjustable-rate HECM, you can take your money as a line of credit, monthly payments for life (tenure) or a set number of years (term), or a combination. A fixed-rate HECM pays one lump sum at closing.
Line of credit
Draw money when you need it. The unused part of your line of credit grows over time at the same rate the loan accrues (the interest rate plus the 0.5% annual insurance premium). That growth makes a HECM line of credit popular as a standby reserve for healthcare, home repairs or a market downturn. You pay interest only on what you use.
Tenure: monthly payments for as long as you live there
Equal monthly payments for as long as at least one borrower lives in the home as a primary residence and meets the loan obligations, even if the total paid eventually exceeds the home's value.
Term: monthly payments for a set time
Larger monthly payments for a number of months you choose, for example to bridge the years before you claim Social Security.
Lump sum (fixed rate)
A single payment at closing with a fixed interest rate. It's often used to pay off an existing mortgage. Because of the first-year limit, a lump sum usually can't access the full amount.
Combinations
Modified tenure and modified term plans pair monthly payments with a line of credit. For example: pay off your mortgage, set up a monthly amount, and keep the rest as a growing line of credit. With an adjustable-rate HECM you can usually change your plan later for a small fee.
Money you keep in the bank can count against Medicaid or SSI limits. Drawing from a line of credit as needed can help; ask a benefits counselor about your situation.