A prospective client called me a few days ago. We discussed his situation for fifteen minutes and I told him flat out the best option for him was an adjustable rate mortgage.
I've spent enough time around the old block to know that If I'm going to say something to a senior like, "you need an adjustable rate mortgage" I better explain myself in no uncertain terms.... And post haste.
Why? Because I know the person is already objecting in their mind. It's already a bad deal. So, I get into why it is a good deal as fast as possible.
I lost the race. This guy was like Speedy Gonzalez. He immediately held up the proverbial stop sign and made it clear, in no uncertain terms, he wanted the fixed rate.
Now I'm not exactly the kind of person willing to accept being squelched. I have a voice, my words make sense, and I was going to tell him where the bear makes in the buckwheat. Wrong! He shut me up again.
Well, he was set in his ways and never did open his mind to logic, but maybe you will. The adjustable rate, as it pertains to reverse mortgages, is typically the way to go.
The reason is the adjustable rate mortgage is available as a line of credit. The fixed does not have this option.
Lenders qualify the senior to receive an available sum of cash equal to 50% to 75% of the home's value. Most only need a portion of this money. This makes the ARM and line of credit more viable.
The adjustable rate, unlike the fixed, gives the borrower to pull out money, from the line of credit, as needed and when needed.
This benefits the borrower's equity. Unused money in the line of credit has no negative affects on the borrower's equity. It's not accruing interesting eating away at the precious equity.
The fixed rate mortgage, on the other hand, forces the borrower to draw out money one time. Naturally, it will be a sizable number. Why do it otherwise.
The guy above owned his home outright and only needed supplemental income. It would be foolish for him to go with the fixed because he'd have to pull out a bunch of money, and put it into an investment or a bank.
The problem is his interest rate on the fixed rate would eat into his equity faster than the money in a bank or some other investment would grow (at least the investment I see today). The ARM in this case, ironically, is the better more conservative choice.
I've spent enough time around the old block to know that If I'm going to say something to a senior like, "you need an adjustable rate mortgage" I better explain myself in no uncertain terms.... And post haste.
Why? Because I know the person is already objecting in their mind. It's already a bad deal. So, I get into why it is a good deal as fast as possible.
I lost the race. This guy was like Speedy Gonzalez. He immediately held up the proverbial stop sign and made it clear, in no uncertain terms, he wanted the fixed rate.
Now I'm not exactly the kind of person willing to accept being squelched. I have a voice, my words make sense, and I was going to tell him where the bear makes in the buckwheat. Wrong! He shut me up again.
Well, he was set in his ways and never did open his mind to logic, but maybe you will. The adjustable rate, as it pertains to reverse mortgages, is typically the way to go.
The reason is the adjustable rate mortgage is available as a line of credit. The fixed does not have this option.
Lenders qualify the senior to receive an available sum of cash equal to 50% to 75% of the home's value. Most only need a portion of this money. This makes the ARM and line of credit more viable.
The adjustable rate, unlike the fixed, gives the borrower to pull out money, from the line of credit, as needed and when needed.
This benefits the borrower's equity. Unused money in the line of credit has no negative affects on the borrower's equity. It's not accruing interesting eating away at the precious equity.
The fixed rate mortgage, on the other hand, forces the borrower to draw out money one time. Naturally, it will be a sizable number. Why do it otherwise.
The guy above owned his home outright and only needed supplemental income. It would be foolish for him to go with the fixed because he'd have to pull out a bunch of money, and put it into an investment or a bank.
The problem is his interest rate on the fixed rate would eat into his equity faster than the money in a bank or some other investment would grow (at least the investment I see today). The ARM in this case, ironically, is the better more conservative choice.
About the Author:
To get big mistakes and seven myths about the California reverse mortgage make it to this site. An excellent question and answer location about the California reverse mortgage is here.
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