If there is no other good news at least we can pick up the news paper every morning and watch interest rates drop.
Seniors more so than others keep track of these things. So, I get a lot of phone calls asking me how the low rate will alter their loan. They assume it will change it for the better.
Imagine their surprise when I let them know rates have actually gone up.
It is true interest rates are extremely low. The main index used for reverse mortgage adjustable rate products is now down to .45%. However, there are more things at work here.
The big reason rates are actually coming up is reverse mortgage investors want more profit out to these loans.
So, Fannie Mae has increased their profit margins by 1% in the last two weeks. This is not a minor change.
To put this in direct terms reverse mortgage margins just went up thirty six percent.
The higher interest rate results in a couple different effects. The first being the reverse mortgage borrowers loses equity in the home that much quicker.
The other affect is a lower loan size.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
The reverse mortgage company has one great fear. That is a home value below that which the borrower owes the mortgage company.
Lending laws don't allow lenders to come after the owners or owner's heirs for the difference. They are stuck with the home value as collateral.
Reverse mortgage borrowers planning on closing in the next thirty days will be getting some bad news from their lender. They've already been assured about how much money they will get.
Some of them are planning to pay off mortgages in attempt to eliminate that high payment. Some of these folks won't be able to pay that mortgage off now.
No one seems to be immune to these tough financial times.
Seniors more so than others keep track of these things. So, I get a lot of phone calls asking me how the low rate will alter their loan. They assume it will change it for the better.
Imagine their surprise when I let them know rates have actually gone up.
It is true interest rates are extremely low. The main index used for reverse mortgage adjustable rate products is now down to .45%. However, there are more things at work here.
The big reason rates are actually coming up is reverse mortgage investors want more profit out to these loans.
So, Fannie Mae has increased their profit margins by 1% in the last two weeks. This is not a minor change.
To put this in direct terms reverse mortgage margins just went up thirty six percent.
The higher interest rate results in a couple different effects. The first being the reverse mortgage borrowers loses equity in the home that much quicker.
The other affect is a lower loan size.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
The reverse mortgage company has one great fear. That is a home value below that which the borrower owes the mortgage company.
Lending laws don't allow lenders to come after the owners or owner's heirs for the difference. They are stuck with the home value as collateral.
Reverse mortgage borrowers planning on closing in the next thirty days will be getting some bad news from their lender. They've already been assured about how much money they will get.
Some of them are planning to pay off mortgages in attempt to eliminate that high payment. Some of these folks won't be able to pay that mortgage off now.
No one seems to be immune to these tough financial times.
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