July 26, 2010	Fixed Rate	Fixed Rate	Monthly Adjustable
Current Rate	4.99%	5.56%	2.088%
LIBOR Index	N/A	N/A	0.341
Margin	N/A	N/A	1.75%
Monthly Servicing Fee	$25	$0	$30
Lending Limit*	$625,500	$625,500	$625,500
Minimum Draw	100%	100%	None
Payment Plans
Cash Lump Sum	Yes	Yes	Yes
Line of Credit	N/A	N/A	Yes
Monthly Payment	N/A	N/A	Yes
Combination	N/A	N/A	Yes
Total Interest Rate charged on a reverse mortgage is the Margin plus Index plus Monthly Mortgage Insurance of 0.50% Example: 4.99% Fixed: 4.99% + 0.50% Monthly MIP = 5.49% Example: 5.56% Fixed: 5.56% + 0.50% Monthly MIP = 6.06% Adjustable Rate Example: 1.75% Margin + Index of 0.341% + 0.5% Monthly MIP = 2.597% *Current lending limits are $625,500 in all areas for the remainder of 2010. Call 888-888-4834 for details. Applicable Mortgage Insurance and TALC (Total Annual Loan Cost) are not reflected. Rates subject to change.

 

 

Choosing Fixed Rate vs. Adjustable Rate Reverse Mortgages

Many seniors we speak to are dead set on a fixed rate reverse mortgage. Well, although it sounds like the most financially "stable" and conservative decision, it's not always the best loan type. When making a decision, remember that changes in your interest rate do not affect your monthly benefit as you are not making monthly payments.

Fixed rate reverse mortgages require that you take a full draw at closing. With a reverse mortgage, you accrue interest on only the money that's been drawn. If you have a large payoff or wish to take all funds available to you at closing, then a fixed rate reverse mortgage may be your best option.

On the flip side, if you do not need all the money that's available to you, a fixed rate reverse mortgage may not be your best option. With an adjustable rate reverse mortgage, you can set up a line of credit, monthly payments, a lump sum or a combination of any of these. In a line of credit, interest is not accrued until you receive the money.

Fixed Rate Reverse Mortgage:

The fixed rate Home Equity Conversion Mortgage (HECM) eliminates the risk of adjustable-rate mortgages. With the HECM Fixed Rate loan, the borrower has the comfort of knowing exactly what their interest rate will be for the life of the loan and the certainty that the rate will never increase. In addition, since the interest accrual is known, borrowers will have the comfort of knowing exactly how much they may pass on to their estate. Borrowers must take a full draw at closing.

Adjustable Rate Reverse Mortgage:

Adjustable rate reverse mortgages have by far been the most popular reverse mortgage loan to date. They are based off of two indices; Treasury Index (CMT) and LIBOR Index.

 

LIBOR Index

LIBOR stands for "London Inter-Bank Offered Rate." It is based on rates that contributor banks in London offer each other for inter-bank deposits. From a bank's perspective, deposits are simply funds that are loaned to them. So in effect, a LIBOR is a rate at which a fellow London bank can borrow money from other banks. Rate calculations are complex as they incorporate variables such as time, maturity and currency rates.

In October of 2007, the Federal Housing Administration (FHA) ruled in favor of allowing the LIBOR index to be used for reverse mortgages in addition to the Treasury (CMT). LIBOR loans in general carry lower margins than the CMT (Constant Maturity Treasury)

About the Treasury Index CMT (Suspended by Fannie Mae)

This index is an average yield on United States Treasury securities adjusted to a constant maturity of 1 year, as made available by the Federal Reserve Board. Yields are interpolated by the United States Treasury from the daily yield curve. This curve, which relates the yield on a security to its time to maturity, is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.

Purchase Reverse Mortgage:

Beginning January 1, 2009, FHA began insuring reverse mortgage loans for Seniors to purchase homes. Reverse mortgages have traditionally been available for refinance loans in the past, provided the Senior resided in the home. Reverse Mortgage for Home Purchase.

Reverse Mortgage Refinance:

Due to H.R. 3221 and the lowest HECM rates available, now has never been a better time to refinance your existing FHA reverse mortgage. There may be additional benefit available to you if you refinance. Call one of our specialist to determine if it makes sense to refinance your reverse mortgage. (888) 888-4834.