Reverse Mortgage Margins on LOC Going Up This Week
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 instance, where reverse mortgages are concerned the majority of seniors were going along with the credit line based on the constant maturity treasury. This index is the basis for the loan.
The treasury index read .40 percent seven days ago, and the margin the mortgage companies charged was 1.75 percent. To find the actual rate of interest for the loan just combine these two numbers, which would equal 2.15 percent.
Fannie Mae (the organization who secures secondary loans) has now forewarned that the bank's margin will increase at least a half percent.
The effects on borrowers will be fairly limited. We've had the good fortune of rates being so low they are below the FHA floor rate which determines how much money a borrower may cash out.
How much a senior is loaned and interest go hand in hand. A loan will be higher if the interest is lower. It goes the other way as well until the ground FHA rate is reached. Then any interest rate less than that rate will not make the loan higher.
Fortunately, we are well below that rate, and for most borrowers the increase in margin won't put them up above the floor. What that means is the borrowed amount they were quoted last week will still be good this week.
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.
The downside is interest is accruing against the equity of the home. The higher margins will simply make that interest accrue a little quicker.
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 instance, where reverse mortgages are concerned the majority of seniors were going along with the credit line based on the constant maturity treasury. This index is the basis for the loan.
The treasury index read .40 percent seven days ago, and the margin the mortgage companies charged was 1.75 percent. To find the actual rate of interest for the loan just combine these two numbers, which would equal 2.15 percent.
Fannie Mae (the organization who secures secondary loans) has now forewarned that the bank's margin will increase at least a half percent.
The effects on borrowers will be fairly limited. We've had the good fortune of rates being so low they are below the FHA floor rate which determines how much money a borrower may cash out.
How much a senior is loaned and interest go hand in hand. A loan will be higher if the interest is lower. It goes the other way as well until the ground FHA rate is reached. Then any interest rate less than that rate will not make the loan higher.
Fortunately, we are well below that rate, and for most borrowers the increase in margin won't put them up above the floor. What that means is the borrowed amount they were quoted last week will still be good this week.
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.
The downside is interest is accruing against the equity of the home. The higher margins will simply make that interest accrue a little quicker.
About the Author:
Surf on to the California spot going over five monster mistakes regarding the reverse mortgage. Another great site that answers twenty top queries regarding a California reverse mortgage is right here
posted by Debt Consolidation Loan at
5:47 PM
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