Adjustable vs Fixed - ARM Wins in Reverse Mortgage World
A senior gentleman gave me a call yesterday. For 15 minutes I assessed his situation and told him definitively he should move forward only with an adjustable rate mortgage.
Now, I know the senior community's take on adjustable rate mortgages, so typically, when I come out and say, "an ARM is the right choice for you", I don't wait for a response. I simply go into my reasoning as soon as possible.
The adjustable already isn't in good standing with the general public. With a conservative group like seniors it's even worse. I better start making sense and quick-like.
Well, this fellow beat me to the punch, which is hard to do when there might have be a millisecond for him to cut me off. When I attempted to explain why he simple grunted gruffly, "FIXED RATE".
I knew he was being somewhat ignorant and the adjustable really was his best option. I tried again and he cut me off again, "FIXED RATE". He was a man of few words. I felt like a little kid being shushed by his father.
Well, he was set in his ways and never did open his mind to logic, but maybe you will. The adjustable rate, as it pertains to reverse mortgages, is typically the way to go.
Here is why: The adjustable has a line of credit option and the fixed does not.
Borrowers qualify to receive a certain amount of money. Most do not need to use all of it. Some hardly need any up front, which makes the line of credit an important option.
The ARM allows the borrower to pull out needed moneys and leave the remainder as a line of credit. The borrower can draw from the line of credit at the borrower's leisure.
This benefits the borrower's equity. Unused money in the line of credit has no negative affects on the borrower's equity. It's not accruing interesting eating away at the precious equity.
When a borrower goes with the fixed rate he takes out a sum of money, either the entire amount or a portion thereof. And "Ba Dee, Ba Dee, Ba Dee, Thats all folks!"
If Mr. Fixed Rate above owned the home free and clear and was getting the reverse mortgage to supplement income, it would be silly to get a fixed rate mortgage. To do so means the borrower would have to pull out a large sum and plop it into a bank or CD awaiting its use.
It does not compute. The rate charged for money pulled out would be greater than the return from the bank or CD. The best option is to go with the ARM and leave it the line of credit. On top of that the 15 year average interest rate on the ARM is lower than the current fixed rate.
Now, I know the senior community's take on adjustable rate mortgages, so typically, when I come out and say, "an ARM is the right choice for you", I don't wait for a response. I simply go into my reasoning as soon as possible.
The adjustable already isn't in good standing with the general public. With a conservative group like seniors it's even worse. I better start making sense and quick-like.
Well, this fellow beat me to the punch, which is hard to do when there might have be a millisecond for him to cut me off. When I attempted to explain why he simple grunted gruffly, "FIXED RATE".
I knew he was being somewhat ignorant and the adjustable really was his best option. I tried again and he cut me off again, "FIXED RATE". He was a man of few words. I felt like a little kid being shushed by his father.
Well, he was set in his ways and never did open his mind to logic, but maybe you will. The adjustable rate, as it pertains to reverse mortgages, is typically the way to go.
Here is why: The adjustable has a line of credit option and the fixed does not.
Borrowers qualify to receive a certain amount of money. Most do not need to use all of it. Some hardly need any up front, which makes the line of credit an important option.
The ARM allows the borrower to pull out needed moneys and leave the remainder as a line of credit. The borrower can draw from the line of credit at the borrower's leisure.
This benefits the borrower's equity. Unused money in the line of credit has no negative affects on the borrower's equity. It's not accruing interesting eating away at the precious equity.
When a borrower goes with the fixed rate he takes out a sum of money, either the entire amount or a portion thereof. And "Ba Dee, Ba Dee, Ba Dee, Thats all folks!"
If Mr. Fixed Rate above owned the home free and clear and was getting the reverse mortgage to supplement income, it would be silly to get a fixed rate mortgage. To do so means the borrower would have to pull out a large sum and plop it into a bank or CD awaiting its use.
It does not compute. The rate charged for money pulled out would be greater than the return from the bank or CD. The best option is to go with the ARM and leave it the line of credit. On top of that the 15 year average interest rate on the ARM is lower than the current fixed rate.
About the Author:
Make sure you get big mistakes and seven myths about the California reverse mortgage make it to this site. For a very good and answer location about the California reverse mortgage is here.
posted by Debt Consolidation Loan at
2:53 PM
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