Why Fixed Rate Has Limited Use for Reverse Mortgage Customers
As information slowly diffuses throughout the senior community regarding reverse mortgages you might surmise that, as a reverse mortgage specialist, I spend a tremendous amount of time educating.
Conversation eventually makes its way to the mortgage options for them and more particularly the interest rate. The truth is that the ARM makes sense for most seniors.
When I relate this to the customer they are temporarily in a state of denial until i have a chance to explain the inner workings of both mortgages. Once they reach understanding the guard comes down.
The reality is the fixed rate option is does not offer the flexibility of the ARM. Only the adjustable rate offers the borrower a line of credit option. The fixed rate, rather, forces the senior to take out money one time and one time only.
The senior gets a two for one deal with the adjustable. First: the senior chooses when to use the money; Second: Interest accumulates only against money's drawn out, leaving the remainder as a non factor.
So, who is our fixed rate borrower? It is definittely the one has to yank out a bunch of money up front. At the end of the day, its the one who has no need for the line of credit because very little or no money remains.
One of the best examples of a fixed rate candidate is the person who qualifies for just enough to pay off their forward mortgage, thereby relieving the borrower from the burden of that monthly payment. In this scenario the logic to getting an ARM is reduced to a wash against the fixed.
Right now the adjustable is extraordinarily low, but its fifteen year average and the current fixed rate are roughly equal. For the conservative reverse mortgage customer looking for a large upfront sum the safe bet is to go with the fixed rate.
Conversation eventually makes its way to the mortgage options for them and more particularly the interest rate. The truth is that the ARM makes sense for most seniors.
When I relate this to the customer they are temporarily in a state of denial until i have a chance to explain the inner workings of both mortgages. Once they reach understanding the guard comes down.
The reality is the fixed rate option is does not offer the flexibility of the ARM. Only the adjustable rate offers the borrower a line of credit option. The fixed rate, rather, forces the senior to take out money one time and one time only.
The senior gets a two for one deal with the adjustable. First: the senior chooses when to use the money; Second: Interest accumulates only against money's drawn out, leaving the remainder as a non factor.
So, who is our fixed rate borrower? It is definittely the one has to yank out a bunch of money up front. At the end of the day, its the one who has no need for the line of credit because very little or no money remains.
One of the best examples of a fixed rate candidate is the person who qualifies for just enough to pay off their forward mortgage, thereby relieving the borrower from the burden of that monthly payment. In this scenario the logic to getting an ARM is reduced to a wash against the fixed.
Right now the adjustable is extraordinarily low, but its fifteen year average and the current fixed rate are roughly equal. For the conservative reverse mortgage customer looking for a large upfront sum the safe bet is to go with the fixed rate.
About the Author:
A far more detailed discussion of of the reverse mortgage in and around texas can be found here.. Q&A plus excellent Texas data and links to important authority sites are at reverse mortgage education for deep thinkers.
posted by Debt Consolidation Loan at
11:31 PM
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