Fixed Rate Reverse Mortgages

Many lenders are now coming out with their own version of  the Fixed Rate reverse mortgage. This is a pretty new concept among reverse mortgages as most, up until now, have been a variable rate. Though this sounds like a great idea, the reality is that I think the variable rate HECM (Home Equity Conversion Mortgage) is going to provide the greatest cash benefit to the borrower, in most cases. The rate typically (in current programs) is based on the Unpaid Principal Balance. This is the balance that the loan initially starts at. It includes all paid off liens, closing costs, and cash withdrawn upfront. The higher the UPB, the lower the interest rate. So, if someone starts with a $150k UPB, it will receive a better rate than a $20k UPB. Think about it . . . . the lender will earn more over time with a $150k UPB, than the $20k.

For those who are doing a reverse mortgage for the purpose of supplemental income (known as the Tenure payment), then the fixed rate may not be acceptable to them. However, it does provide some guarantees, and people like guarantees. It will continue to be a hot topic for many of the major lenders.

Explore posts in the same categories: Reverse Mortgage Details

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