5 Facts Of The Reverse Loan Rates

5 Facts Of The Reverse Loan Rates

5 Facts Of The Reverse Loan Rates

If a senior is refinancing the home with the reverse loan he has to know, that there are actually two interest rates, which he has to take into account. To-day the HECM reverse loan is the only available loan variant.

As you may know the HECM reverse loan is backed by FHA, the Federal Housing Administration. This offers a lot of protections for the seniors.

1. The Initial Rate.

The first reverse loan rate is called the Initial Rate or the Current Rate. The HECM requires, that a senior borrower has to take the mortgage insurance. This has its price, which will be added to the account of a senior. A senior has to choose, whether he wants a monthly or yearly interest rate adjustment period. This period is fixed and cannot be changed later. The two adjustment periods for the Initial Rate are tied to the one year US Treasury Security Rate.

2. The Expected Rate.

The expected rate is used, when the amount of the reverse loan or the maximum amount of loan you can borrow are calculated. The lower the expected rate is, the bigger amount a borrower can get. The expected Rate Equals the 10 Year US Treasury Rate added by the lenders margin.

3. The Influences On The Refinancing.

Many seniors use the reverse loan to refinance their present mortgages and to get lower monthly expenses. The main point is of course the interest rate, but because the reverse mortgages have quite many expenses, which are paid at closing, it is useful to know all the details to be able to make the correct calculations.

4. Talk With A Counselor.

The cost structure of the reverse loan is full of small items, which seem things without any importance. However, when the loan running time is years, it is useful to know their impact on the final payments. The reverse counselor is the correct person to make the needed calculations and to give useful guidance.

5. The Variable Or Fixed Interest Rate?

The state of the economy influences on the reverse mortgages and their costs. Because this loan will be paid back after years and there is no monthly payments, the costs are hidden ones. Many seniors may feel, that the money is free and do not care to calculate the full costs. However, the choices a senior will make before signing will have a big influence on the final costs. One of the most important ones is, whether a senior will take a variable or fixed interest rate.

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