Fixed Rate Starting to Look Better for Reverse Mortgage
If you were to ask me one year ago which choice for senior borrowers was the better one, between the fixed rate and the adjustable, I would have told you the adjustable with few exceptions.
Cut to the present and that isn't so much the case anymore. This is because the banks dealing in reverse mortgages keep striving to increase their take on the deal.
Rough 14 months ago the margin banks and investors in mortgage backed securities needed was one percent. Margin is simply the profit in the loan.
To give an example the borrower may have gone with an adjustable rate mortgage with an index of one percent. If the margin was an additional one percent the actual loan rate would have been 2%.
Well, margins are on the rise since this time last year. By March they went to one point five percent and by October one point seven-five percent.
Well, it's on the move again. It appears Fannie Mae is telling us preemptively that the expected margin next week will raise up about one half point next week.
I have another article dealing with why the adjustable rate option is so good when it comes to reverse mortgages. It still is, but the fixed rate is becoming more and more attractive as these margins rise.
Here is a thought: what if, at close of escrow, the senior takes a large lump sum when getting a reverse mortgage.
What if the borrower had the choice of taking a large lump sum like $150,000. The lender gives the choice of taking any denomination. What if the borrower takes it all. In this case the fixed may be better because it's about the same as the average on the adjustable with the new higher margins.
Yes, it is true that the ARM is at an unbelievably low point right now, but we're realists and we know this sucker is going up sooner or later.
One other benefit to the ARM over the fixed was that lenders were giving substantially more money on the ARM. This number is not nearly so profound today.
The ARM used to be a no brainer in terms of how much money it gave a borrower rather than the fixed. It's far closer now and one never knows. Perhaps after the change the fixed will give more.
The fixed rate was the ugly sister in reverse mortgages. This is changing.
Cut to the present and that isn't so much the case anymore. This is because the banks dealing in reverse mortgages keep striving to increase their take on the deal.
Rough 14 months ago the margin banks and investors in mortgage backed securities needed was one percent. Margin is simply the profit in the loan.
To give an example the borrower may have gone with an adjustable rate mortgage with an index of one percent. If the margin was an additional one percent the actual loan rate would have been 2%.
Well, margins are on the rise since this time last year. By March they went to one point five percent and by October one point seven-five percent.
Well, it's on the move again. It appears Fannie Mae is telling us preemptively that the expected margin next week will raise up about one half point next week.
I have another article dealing with why the adjustable rate option is so good when it comes to reverse mortgages. It still is, but the fixed rate is becoming more and more attractive as these margins rise.
Here is a thought: what if, at close of escrow, the senior takes a large lump sum when getting a reverse mortgage.
What if the borrower had the choice of taking a large lump sum like $150,000. The lender gives the choice of taking any denomination. What if the borrower takes it all. In this case the fixed may be better because it's about the same as the average on the adjustable with the new higher margins.
Yes, it is true that the ARM is at an unbelievably low point right now, but we're realists and we know this sucker is going up sooner or later.
One other benefit to the ARM over the fixed was that lenders were giving substantially more money on the ARM. This number is not nearly so profound today.
The ARM used to be a no brainer in terms of how much money it gave a borrower rather than the fixed. It's far closer now and one never knows. Perhaps after the change the fixed will give more.
The fixed rate was the ugly sister in reverse mortgages. This is changing.
posted by Debt Consolidation Loan at
7:24 PM
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