Fixed Rate vs. Monthly Adjustable Reverse Mortgage

When looking to get a FHA reverse mortgage, you now have the option to choose between a fixed rate mortgage and an adjustable rate mortgage. Not long ago, you only had one option - an adjustable rate reverse mortgage. Just recently, however, HUD has now provided a way to have another choice for your Home Equity Conversion Mortgage (HECM), or reverse mortgage.

Here are some reasons why a fixed rate reverse mortgage may be the better choice for you.

You Know How Much Money You Have

With an adjustable rate reverse mortgage, you never really know just how much money you have left available to you. Since the interest rate will change on either a monthly or annual basis, you could end up with a lot less money overall than what you had anticipated.

A fixed rate reverse mortgage, however, gives you a lump sum of all money coming to you. You receive it all at closing. There are no unseen elements in the plan that can affect changes in the amount you have later. It is all yours from the very start.

There Are No Surprise Interest Rate Hikes

Our nation's economy has seen a lot of changes recently, and there may still be unforeseen problems yet to come. Problems in it will affect your interest rates - either for good or bad. If you recently suffered loss of money in some investment you had, you have already experienced what could happen. Hopefully, it will not happen again anytime soon.

On an adjustable rate reverse mortgage, interest rates are protected by HUD and limited to a 10% increase from the starting point. No matter how you look at it, though, many people could not afford that kind of a raise in their interest. While no payments are made during the lifetime of the owner of the reverse mortgage, it is charged to the account and it will be paid later.

A fixed rate reverse mortgage does not have any changes in the interest rate. It is set from the start, which is why they can give it all to you as soon as the ink is dry.

You Can Make Better Plans for Your Money

An adjustable rate reverse mortgage is often a good way to go. There is, however, the potential for a rapid and unexpected drain of your money through increased interest rates.

A fixed rate mortgage gives you all your money from the start. This enables you to know exactly how much money you have allowing you to make better plans with it. This can also make your relatives - your heirs - happier because they know that more of it will probably come their way if you do not use it all yourself. Of course, if you do live longer than anticipated, it also means that your money will possibly last longer than an adjustable rate reverse mortgage which may experience higher than expected interest rate changes.

You can start looking into whether or not a fixed rate HUD reverse mortgage is what you need by using an online reverse mortgage calculator. Counseling is required by law and will also have to be provided in order to help you make the right financial decisions.

A thirteen-year veteran of the mortgage industry, Robert Griffin specializes in reverse mortgages and has helped over 3000 Americans find financial security with a reverse mortgage. The owner of Griffin Financial Mortgage LLC, based in Fort Worth, Texas, his memberships include the National Association of Mortgage Brokers (NAMB), the Mortgage Bankers Association (MBA), the National Reverse Mortgage Lenders Association (NMRLA) and the Better Business Bureau (BBB). Robert Griffin is also co-author of “62 Senior Moments.” If you would like more information, please call (866) 683-3690 or complete our online Reverse Mortgage Information.

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Generation Turns To GNMA For Competitive Fixed Rate Reverse Mortgage

Generation Mortgage announced to its brokers that is in the process of working out the details in order to offer a competitive fixed rate HECM utilizing Ginnie Mae’s HECM MBS product.

Currently the product is available to a select group of brokers in order to fulfill its commitments to Ginnie Mae, but they plan to open it up widely mid to late June said a company statement.

Companies like MetLife and Generation are able to offer extremely competitive fixed products using Ginne Mae’s HMBS product due to investor interest from Wall Street. Rate sheets that I’ve seen show rates are almost 1% better (lower) when compared to lenders delivering fixed rate products to Fannie Mae.

However, Ginnie Mae’s pricing advantage comes with some additional risks to lenders. “The biggest concern is that Ginne Mae requires the loan to be repurchased out of the fund when it hits 98%, and if the loan is in default for taxes or insurance, HUD won’t take it,” said Sherry Apanay, Senior VP of Generation Mortgage.

This creates a problem for non-bank reverse lenders who don’t have the ability to hold the loan on its balance sheet until it pays off. Sources tell RMD that there continues to be discussions between potential issuers and Ginne Mae officials to see if there is a way to restructure the program to ensure non-bank lenders can compete.

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Reverse mortgages should have fixed interest rates

I'm glad to see that the government has considered reverse mortgages in the stimulus package. But still not enough has been done.

This has been one of the biggest rip-offs in the banking business -- and directed at seniors, which is inexcusable.

The biggest problem with the reverse mortgage is not the exceedingly high origination costs, the maintenance costs or the low ceiling on loans, but the fact that there is no fixed interest rate. The approximate rate you quote in your article is 4%, but who knows what the interest rate will be in five or 10 years.

With rates at a historic low, this is an unseemly burden to seniors and their heirs.

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