Reverse Mortgage Fixed vs Adjustable Interest rates
Adjustable Rate Reverse Mortgage – Best Deal Right Now?
Fixed Rate Reverse Mortgages
According to a recent HECMCounselors.org training manual on reverse mortgages, these rates have come to be a favorite in the HECM marketplace since 2009, with about 67% of originated reverse mortgage loans having a fixed rate. They are popular with borrowers because they eliminate the risk that their rate will increase. But, this does not necessarily mean that it is the best loan type for you. There are pros and cons to a fixed rate loan:
Fixed rates are certain to remain the same for the entire loan term, so you are protected if market rates rise.
Borrowers who choose a fixed rate reverse mortgage must take their funds as a lump sum, as opposed to other disbursement options offered under a variable rate.
When taking a lump sum, borrowers who are not going to use it for a mandatory obligation, such as paying off an existing mortgage, are restricted to pull only up to 60% of the principal limit of the loan. If mandatory obligations cause the 60% threshold to be exceeded, another 10% may be accessed, however the upfront mortgage insurance premium (MIP) will increase from .5% to 2.5%.
Due to these details, fixed rate reverse mortgages are usually best for borrowers who plan to use their reverse mortgage funds all at once, such as to pay off an existing mortgage or other debt, or to make major home repairs or modifications.
Michael Gaddis, J.D. is Southern California’s top mortgage broker and CEO of Frontier Loan Group, Inc. (FLG).
FLG dedicates its services to helping seniors achieve the quality of life they deserve through education and transparency always keeping our clients’ best interest in mind.
In addition; Frontier Loan Group’s services include:
Reverse Mortgages (HECM)
For more information on Michael Gaddis, J.D. or FLG please visit:
6104 Innovation Way, Carlsbad, CA 92009.
Licensed by the California Bureau of Real Estate.
CA BRE#01449152, NMLS#345305, CA BRE #01433800, NMLS#280011.
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