Reverse Mortgage Rates – How Changing Interest Rates Can Affect Your Mortgage Payment
Are you in the market for a reverse mortgage? If so, then you’ve come to the right place. In this brief article, I’m going to give you information about reverse mortgage rates and why it might be a smart financial move for you. But before I do, I want to assure you that these are not scam or illegal practices. They are real, professional lenders who want to help you get a little extra cash for your retirement. In most cases, they will even help with the closing costs.
So what is a reverse mortgage and why might someone want to take advantage of one? Basically, it’s an option for senior citizens who wish to convert their fixed rate mortgage into an interest only mortgage. Interest only mortgages offer lower payments at first, but you will end up paying more in the long run as the interest earned by the loan is tax-deferred. You’ll also have to deal with the lender, which can be tricky if you don’t have experience in this field.
However, there are reverse mortgage rates that will work for your situation. Some are based on the lifetime cap. The lifetime cap refers to how long the loan can be used for. Most lenders set the limit at 80 years. If you don’t reach the lifetime cap, you’ll pay the full amount each month until it’s depleted.
Another type is the indexed reverse mortgage, which bases its rates on a set percentage of your home equity. The higher the percentage that you choose, the lower your payments will be. The disadvantage is that the reverse mortgage may not be right for you depending on how much home equity you have built up.
A third type is the FHA-insured or guaranteed loan or the GIC mortgage. This is a special type of reverse mortgage that is created by the federal Housing and Urban Development Department. It provides tax incentives to borrow money and is not subject to the borrowing limits imposed by the Federal Reserve Board. This means that anyone can borrow up to the full amount of the loan’s potential interest income, which is around 140% of the home equity conversion mortgage’s maximum.
Many seniors think about these three reverse mortgage products when they’re thinking about home equity options. While you should certainly consider them, it’s also important to note that they all have their drawbacks. Seniors who own their houses outright are best served by other options, such as the fixed rate conventional mortgages. Those who want assistance in building their equity should also research opportunities to obtain federal loans and home equity conversion mortgages from banks.
The good news is that seniors who own their homes can still get help if they need it. Lenders are more than willing to work with qualified borrowers. In some cases, they may even offer a break on the interest rate. They may also reduce the loan’s payments for a year or two, thereby reducing the senior’s interest expense. In many cases, there will be no penalties for early payments. Lenders know that borrowers have already paid their dues and are trying to take care of their financial responsibilities.
Lenders have long been offering adjustable interest rates to their customers. Seniors who are planning to remain living in their homes for several years will benefit the most from this type of loan. But while they might enjoy fixed interest rate reverse mortgage rates, they might have to pay the higher price for it, depending on the market’s performance. The only way to determine how variable interest rates affect a reverse mortgage is to ask your broker or customer service representative.