Posted on: 20th Jun, 2009 05:59 am
Are all reverse mortgages calculated using the adjustable rate on interest? if so why??
millerja9
Before 2007, all major reverse mortgage companies had adjustable interest rates. Similar types of adjustable rate reverse mortgages are still being offered which are either adjusted on a monthly, semi-annual, or annual rate
Several mortgage companies now offer FHA HECM reverse mortgages which have fixed interest rates. most of these reverse mortgages have interest rates that are inline with the current FHA/VA rate plus the mandatory mortgage insurance premium.Some fixed rate reverse mortgages limit the cash proceeds to half of that offered by adjustable rate reverse mortgages. this is the basic difference.between fixed and adjustable interest rate calculation.
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Before 2007, all major reverse mortgage companies had adjustable interest rates. Similar types of adjustable rate reverse mortgages are still being offered which are either adjusted on a monthly, semi-annual, or annual rate
Several mortgage companies now offer FHA HECM reverse mortgages which have fixed interest rates. most of these reverse mortgages have interest rates that are inline with the current FHA/VA rate plus the mandatory mortgage insurance premium.Some fixed rate reverse mortgages limit the cash proceeds to half of that offered by adjustable rate reverse mortgages. this is the basic difference.between fixed and adjustable interest rate calculation.
keep in touch.
:arrow: :arrow: :arrow:
You are absolutely correct; all reverse mortgage products currently available to consumers have adjustable rates.
The reasons for this are somewhat complicated and mostly have to do with thesecondary mortgage market and FHA and HUD rules. In the simplest terms, however, banks don't know how long the customer will have the loan (the term is based on when the borrower either vacates the property or passes away), so they don't have a fixed period for calculating their expected return. The interest rate is indexed to the One-year U.S.
Treasury Securities plus a margin of one-and-one-half per cent (1.50%). Lender origination fees are fixed by the FHA at 2% of the lending limit.
The reasons for this are somewhat complicated and mostly have to do with thesecondary mortgage market and FHA and HUD rules. In the simplest terms, however, banks don't know how long the customer will have the loan (the term is based on when the borrower either vacates the property or passes away), so they don't have a fixed period for calculating their expected return. The interest rate is indexed to the One-year U.S.
Treasury Securities plus a margin of one-and-one-half per cent (1.50%). Lender origination fees are fixed by the FHA at 2% of the lending limit.