Why Reverse Mortgage Rates Are Different From Money Lenders?

Reverse Mortgage Rates

While there are some fees associated with reverse mortgages, the highest cost associate with the product is interest.  Reverse Mortgage Rates are different from money lenders as they float based on an established benchmark interest rate index and can be adjusted, periodically, within maximum allowable adjustments and within established interest rate caps.


The main difference between the interest rates on reverse mortgages and those of traditional money lenders is the the interest payments on a reverse mortgage are added on to the principal of the loan.  No payments are due until the borrower leaves the home or dies.  Also, unlike traditional loan products, the amount due on a reverse mortgage will never exceed the value of the property, even if the value of the property decreases over the lifetime of the loan.


Home equity lines of credit are often considered to be an alternative to a reverse mortgage.  However, the primary disadvantage of the home equity line of credit is that loan payments are due immediately and a variable interest rate means that the payment due may increase dramatically if the rates go up.  This is a great concern for seniors who are on a fixed income and it also opens up the possibility of defaulting on the loan and losing the property.


Another popular method for securing money from your home is downsizing.  As appealing as it may sound, downsizing has its drawbacks as it is impossible to fully arrive at the moving expense and declining home values and a tough real estate market may make it difficult to sell your home in a timely manner.  Despite these uncertainties, it may be worth your effort to consider how much you can sell your home for and what your cost would be on securing a less expensive home.  Other factors such as the cost of a Realtor, moving costs, and the emotional attachment you have to your home are also important to consider.  While traditional home loan products still hold a firm place in the market today, a reverse mortgage may eliminate many of the disadvantages of the more traditional loans.


What Hidden Charges Are Involved In Reverse Mortgage Rates?


When considering a reverse mortgage, it is important to be aware of the various costs associated with the loan.  Speaking with a qualified reverse mortgage specialist can inform you on what hidden charges are involved in reverse mortgage rates.  Once you have a full understanding of what you are paying for, your decision will be more clear on which loan product is right for you.


Typically, reverse mortgages have a higher closing cost than traditional mortgages.  These costs are usually paid for with the proceeds from the loan itself, leaving you with less money or having to borrow more.  Some of the fees that may be included in a reverse mortgage include:


●     The cost of pre-existing mortgages or other liens

●     Broker commissions or origination fees

●     Mortgage insurance premiums

●     Appraisal fees, recording fees, and other documentation fees

●     Repair rider fees

●     Service release premiums and loan correspondent fees


I addition to the fees and costs listed above, there are some expenses you will still be responsible for paying as you are receiving monies from your reverse mortgage.  These expenses may include:

●     Property taxes

●     HOA fees

●     Property repair costs

●     Homeowner’s Insurance


There are many steps you can take to avoid being caught off guard by hidden fees in a reverse mortgage.  The most important thing you can do is research the product.  During your research you will want to ask exactly what product you are buying, how it works, and what are the benefits to you.  Inquire about the interest rate and the closing cost.  Be sure to get everything in writing.


Additionally, it is a good idea to enlist the help of an independent counselor.  This should be someone who is very familiar with reverse mortgages and someone who has no direct conflict of interest with the financial institution with which you are considering doing business.  In some cases, you may research the broker through your State Department of Real Estate.  This will inform you of any prior complaints that may have been filed about the broker and may save you from getting involved with an unscrupulous lender.


The rate of borrowing on reverse mortgages does not vary much from that of traditional mortgage lenders. Before you settle for any mortgage rate reverse, it is important to shop around to find the cheapest rate on the market. You can arrive at this by comparing mortgage rates among different companies using a mortgage calculator. A reverse mortgage calculator can be found on a number of websites, and this will save you a lot of effort and time that you could have spent moving from one mortgage lender to another.


It is important to remember that you will still pay interest on the loan. whether you receive your payment in a lump sum, via a credit line or through monthly installments. All companies that offer mortgage in the United States have a marginal line on which they base their interest rates. However, this may vary from one company to another depending on the movement of the treasury rates. With this in mind, some lenders may adjust their rates on a monthly or a yearly basis.


An exceptional mortgage is the fixed reverse mortgage rate. which interest rate is fixed at the beginning of the contract and will not change in the life of the mortgage contract. This kind of a mortgage will not be determined by your credit history or income level. If you are a senior citizen who is not currently servicing any mortgage, then you qualify to apply for one.


Finally, regardless of the mortgage that you choose the most important thing is how much you will pay back as interest. The lower the Reverse Mortgage Rates, the better for you.