The tenure payment option offered by the HECM program provides seniors with additional monthly income for as long as they live in their house, It ceases when the borrower dies or moves out permanently.
A valuable feature of the tenure payment is that, relative to cash withdrawal, debt accumulation in the early years is slower because equity is reserved for future payments. For example, after 5 years, the debt of a 72-year old who takes the largest possible tenure payment is only about one-third as large as the senior who withdraws the maximum amount of cash. This means that if the borrower dies early, her estate is substantially larger if she had taken the tenure payment.
Further, seniors who take a tenure payment can modify their transaction at any time by paying $20 to the servicer. For example, the senior who finds that the monthly tenure payment won’t be needed for awhile can switch the unused equity to a credit line, which will grow in size from that point on. In the opposite case, the senior who needs a larger payment can switch to a term payment.