Reverse Mortgage Rates Take Leap Up In Coming Days
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.
What I'm referring to here is the fact that this week, the margins charged by reverse mortgage lenders nationwide will increase a half percent or more.
What the heck is a margin? I was getting to that. The margin is the profit built into the loan by the bank and those that would put their money into mortgage backed securities.
The line of credit based on the constant maturity treasury index is what almost all borrowers of a reverse mortgages were using if the went forward with a reverse mortgage with a line of credit.
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.
We are luckily a good bit under the floor FHA rate, and the margin going up will not throw seniors above it. So if you were given a loan quote last week, it is still okay to go by that.
What will happen is the equity will evaporate slightly more rapidly due to the margin being raised. This isn't the best thing about a reverse loan, but not having to pay the mortgage company every month helps.
Interest is eating away equity, and that is the negative aspect. Due to the marginal increase, it will deduct from it a little more rapidly than before.
What I'm referring to here is the fact that this week, the margins charged by reverse mortgage lenders nationwide will increase a half percent or more.
What the heck is a margin? I was getting to that. The margin is the profit built into the loan by the bank and those that would put their money into mortgage backed securities.
The line of credit based on the constant maturity treasury index is what almost all borrowers of a reverse mortgages were using if the went forward with a reverse mortgage with a line of credit.
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.
We are luckily a good bit under the floor FHA rate, and the margin going up will not throw seniors above it. So if you were given a loan quote last week, it is still okay to go by that.
What will happen is the equity will evaporate slightly more rapidly due to the margin being raised. This isn't the best thing about a reverse loan, but not having to pay the mortgage company every month helps.
Interest is eating away equity, and that is the negative aspect. Due to the marginal increase, it will deduct from it a little more rapidly than before.
About the Author:
Scooter to a strong California website hitting the 5 big mistakes to make when getting a reverse mortgage. An additional site covering twenty top queries about the California reverse mortgage is right here
posted by Credit Counseling at
5:29 PM
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