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All-Time Low Fixed Rate Reverse Mortgages

December 18th, 2011
     

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Many senior borrowers who start looking into reverse mortgages are not aware of it, but there is a NEW Lower fixed rate reverse mortgage (HECM) available.

The HECM or “Heck-um” as you may hear it called, is the government insured reverse mortgage program offered by lenders and insured by the Federal Housing Administration. Most Reverse Mortgage borrowers have chosen the adjustable rate option for the simple fact that the fixed rates have historically been quite a bit higher than the adjustable rates, the borrowers qualified for less money with fixed rates and since the borrowers have to take a full draw on the fixed rate loans, it just did not make sense for many senior borrowers. It is finally time for senior borrowers to look at the fixed rates as a viable option.

The Fixed Rate Reverse Mortgage for April 2012 is down to 4.00% (this is the Initial Interest Rate and the Effective Rate on the fixed program since there are no indices or margins to consider). This means that when you compare this to an adjustable HECM on the Libor with a 1.75% margin, the fixed rate, will never increase and the rate is at 4.00% versus the adjustable option which can increase. With the adjustable rate, the borrower’s eligibility is based not on the Initial Rate of 2.1% but rather on Expected Rate which is based on the 10 year Libor plus the margin and that rate today is 5.07%.

In other words, the amount the borrower will receive under the two options is extremely similar with today’s fixed rates instead of the large disparity that fixed rate borrowers have always seen in the past. What does this mean for senior borrowers? It means that they have a better opportunity now to obtain a low Fixed Rate Reverse Mortgage than at any time.Also, since the rate is fixed, it will never go up even if the interest rates rise in the future. This means your equity will not erode as fast if rates do rise. If the rates go down in the future, the fixed rate will not change with those changes either, but the adjustables have a ceiling, or cap on the rate of 10% above the initial rate so the interest that accrues on the adjustable rate reverse mortgages could go up dramatically if the rates rise in the future.

Historically, adjustable rates have not been a bad choice either, but for the next few years in this very volatile economy, no one knows where rates are headed. The other consideration with a fixed rate reverse mortgage loan is payment options. On the adjustable reverse’s, you can get a lump sum payment (that is all your money up front); a line of credit to use when you want that grows on the portion that you don’t use; a monthly payment for a set period of time or for life; or a combination of any of these terms (in other words, you could take cash payment now AND keep some back for a line of credit for when you need it AND get a monthly payment).

However, the only option available on the fixed rate is the one time distribution at the initial funding. If you are paying off an existing mortgage and need it all up front, this would not be a problem and the fixed rate is an excellent option, especially now. If you wanted to get a line of credit or monthly payments, they you still need to look into the adjustable rate options.

So as is the case with reverse mortgages in general, education and knowing what your needs are and what will fill those needs is the key to deciding what’s best for you. A fixed rate is something that many borrowers like the sound of but shied away from as soon as they saw that they received a lot less money under this option. If this is the case for you and a one-time distribution works for your circumstances, now is the time to reconsider the fixed rate option.

The rate is not locked until the lender is ready to draw the loan documents so it is not like a forward mortgage, you cannot lock in a rate for 30 days up front. Nonetheless, if a fixed rate reverse mortgage sounds good to you, then there is no time like the present to take a hard look at this opportunity with the rates being down

The experts at All Reverse Mortgage® are here to answer your questions! If you have an inquiry about the fixed rate reverse mortgage give us a call Toll Free (800) 565-1722 or request a quote clicking here »

All-Time Low Fixed Rate Reverse Mortgages By Mike Branson – Add me to your circles
PS – We also welcome and respond to comments below…

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7 Comment(s)
Mortgages
10/29/08 3:40pm
Information about mortgages is so helpful. There are a lot of things to consider when looking for a mortgage company. It’s good to know as much as you can while shopping.
Credit
1/1/09 9:14am
I would link to ask whether you need to have a good credit score to get a Reverse Mortgage.
paul
3/9/09 10:11pm
Hello- the question about whether or not there is a need for a goos credit score is simple; it is irrelevant! There are no ‘credit requirements’ when it comes to eligibility for a Reverse Mortgage. You are ‘eligible’ if you at least 62 years of age, own your own home (and, if it is a mobile home or manufactured until- it must not be OLDER THAN 1976), and- have a reasonable degree of ‘unused’ equity in the property. As a very general rule of thumb; if there is an existing conventional Mortgage note on your home it should LESS THAN roughly 55% of the home’s fair market value in order to ‘qualify’ for a sufficient FHA benefit. In October of 2008 the Home Equity Conversion Mortgage ( H E C M ) Lending Limits wer made universal (previously, each county within the US had it’s own unique figure) and raised to $417,000.00. Just this month, they were again raised (until the end of the year for now) to $625,000.00. What’s it mean? If your home IS NOT worth $625K or more, then it won’t generate an appreciable increase in available benefit to the Homeowner. However, homes worth MORE THAN $417 K (for an example) will be able to capture a much different, larger award than what they’d have been given BEFORE March 4, 2009 when the increase to ^625K was made… We’ve been executing Reverse Mortgage Applications successfully since 1999. I personally have interviewed nearly 1200 candidates since mid 2006. I’d be happy to help
frank Ormond
4/7/09 3:16pm
What are the fixed rate reverse mortgages today April 8, 2009
joseph gross
8/14/09 2:39pm
what is the maxi rate maximum fixed rate loan on a home in which the youngest owner was born on 12/25/1933 anD the FHA appraisal is $320000.?
Cleminson
5/11/11 2:30am
Thanks for keeping us posted. Like the fix rate dropping. Keep working on the closing costs and fees. Thank you. Bob Cleminson
Bonnie Derrick
7/30/11 8:23pm
My husband and I are considering purchasing in a 55+ community with a reverse mortgage. Our current hone is up for sale and has been getting showings. I am 66, he is 70. We have great FICO scores. We would want to purchase with a fixed rate. Very confused on all the info out there. Our realtor has referred us to a local mortgage company and the only one who knows about reverse mortgages is rarely there. We know we have to get counseling and having trouble finding free or low cost. Simply in a dither as to right decision.

By Michael G. Branson – Add me to your circles

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