When going forward with a reverse mortgage the borrower has multiple options. The line of credit is, by far, the number one option and for good reason.
The reason for this article is to let you know about the margin increase taking place (within 7 days) in the reverse mortgage industry. This increase will be by at least .5%
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.
Last week the constant maturity treasury index was .40%. The margin banks were charging was 1.75%. This is the mortgage company profit. So, the actual interest rate was the margin plus the index totaling 2.15%.
We received word yesterday that Fannie Mae, the body securitizing these loans on the secondary market, has indicated this margin is going up a minimum of 1/2%.
This won't necessarily hurt the borrowers profoundly. So far the rates have luckily been low enough to be under the Federal Housing Administration's lowest rate, which is what decides the amount of money that can be loaned to a borrower.
The loan amount a borrower is eligible to receive and interest rate have an inverse relationship. The reverse mortgage will be greater if the rate is low, but if the rate is so low it meets or is below the FHA floor, the senior's loan won't be increased to match it.
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.
The higher marginal charge will deduct from the equity in the home more quickly. Yes, I just mentioned a negative of the reverse mortgage. But remember the senior won't be paying anyone, which is a huge plus.
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 reason for this article is to let you know about the margin increase taking place (within 7 days) in the reverse mortgage industry. This increase will be by at least .5%
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.
Last week the constant maturity treasury index was .40%. The margin banks were charging was 1.75%. This is the mortgage company profit. So, the actual interest rate was the margin plus the index totaling 2.15%.
We received word yesterday that Fannie Mae, the body securitizing these loans on the secondary market, has indicated this margin is going up a minimum of 1/2%.
This won't necessarily hurt the borrowers profoundly. So far the rates have luckily been low enough to be under the Federal Housing Administration's lowest rate, which is what decides the amount of money that can be loaned to a borrower.
The loan amount a borrower is eligible to receive and interest rate have an inverse relationship. The reverse mortgage will be greater if the rate is low, but if the rate is so low it meets or is below the FHA floor, the senior's loan won't be increased to match it.
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.
The higher marginal charge will deduct from the equity in the home more quickly. Yes, I just mentioned a negative of the reverse mortgage. But remember the senior won't be paying anyone, which is a huge plus.
The downside is interest is accruing against the equity of the home. The higher margins will simply make that interest accrue a little quicker.
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Head over to this California website hitting the 5 big mistakes to make when getting a reverse mortgage. An additional site covering twenty top queries about a reverse mortgage in California is right here
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