Fannie Mae Bumps Rates for Reverse Mortgage by Week's End
When seniors decide to go with a reverse mortgage, the majority pick the credit-line option. There are several motives for this, but we'll tackle that another time.
The point here is to inform you that, industry wide, the margins reverse mortgage companies charge will go up this week by, at the very minimum, 1/2 percent.
Perhaps you aren't clear on what a margin is? Well, allow me to inform. The banks and their investors charge a percentage inside the interest rate as their profit. This is margin.
For example, most borrowers, in the reverse mortgage arena, were moving forward with the constant maturity treasury based line of credit. The constant maturity treasury is simply an index or basis for the loan.
Last week the constant maturity treasury index was .40%. The margin banks were charging was 1.75%. This is the mortgage company profit. So, the actual interest rate was the margin plus the index totaling 2.15%.
We received word yesterday that Fannie Mae, the body securitizing these loans on the secondary market, has indicated this margin is going up a minimum of 1/2%.
This won't necessarily hurt the borrowers profoundly. So far the rates have luckily been low enough to be under the Federal Housing Administration's lowest rate, which is what decides the amount of money that can be loaned to a borrower.
The loan amount a borrower is eligible to receive and interest rate have an inverse relationship. The reverse mortgage will be greater if the rate is low, but if the rate is so low it meets or is below the FHA floor, the senior's loan won't be increased to match it.
At current standing the floor rate is high above us. This means the marginal increase, thankfully, will not put reverse mortgage borrowers above it. So it is still fine to use a estimate given to you in the last couple weeks.
What the margin increase will do is eat into equity a little faster. This is one of the downsides to the reverse mortgage. The up side is the borrower doesn't have to make payments.
So the bad news is interest is gathering against property equity. This increased marginal charge will just have it gather slightly faster.
The point here is to inform you that, industry wide, the margins reverse mortgage companies charge will go up this week by, at the very minimum, 1/2 percent.
Perhaps you aren't clear on what a margin is? Well, allow me to inform. The banks and their investors charge a percentage inside the interest rate as their profit. This is margin.
For example, most borrowers, in the reverse mortgage arena, were moving forward with the constant maturity treasury based line of credit. The constant maturity treasury is simply an index or basis for the loan.
Last week the constant maturity treasury index was .40%. The margin banks were charging was 1.75%. This is the mortgage company profit. So, the actual interest rate was the margin plus the index totaling 2.15%.
We received word yesterday that Fannie Mae, the body securitizing these loans on the secondary market, has indicated this margin is going up a minimum of 1/2%.
This won't necessarily hurt the borrowers profoundly. So far the rates have luckily been low enough to be under the Federal Housing Administration's lowest rate, which is what decides the amount of money that can be loaned to a borrower.
The loan amount a borrower is eligible to receive and interest rate have an inverse relationship. The reverse mortgage will be greater if the rate is low, but if the rate is so low it meets or is below the FHA floor, the senior's loan won't be increased to match it.
At current standing the floor rate is high above us. This means the marginal increase, thankfully, will not put reverse mortgage borrowers above it. So it is still fine to use a estimate given to you in the last couple weeks.
What the margin increase will do is eat into equity a little faster. This is one of the downsides to the reverse mortgage. The up side is the borrower doesn't have to make payments.
So the bad news is interest is gathering against property equity. This increased marginal charge will just have it gather slightly faster.
About the Author:
Surf on to the California website hitting the several hugh blundersto make when getting a reverse mortgage. Another great site that answers twenty top queries regarding a California reverse mortgage is right here
posted by Debt Consolidation Loan at
5:23 PM
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