As a specialist in reverse mortgages you might imagine I spend a great deal of time explaining the basic workings of the reverse mortgage to potential clients. As a whole the general public is still in the dark.
Conversation eventually makes its way to the mortgage options for them and more particularly the interest rate. The truth is that the ARM makes sense for most seniors.
This always makes me smile a bit because when I spring it on the prospective customer, I know they will have a bit of a conniption until I have a chance to fully explain why. Then they reach acceptance.
The biggest problem with the fixed rate, in the reverse mortgage business, is it does not offer the customer a line of credit option. The borrower is forced to immediately draw out that which the customer qualified to receive, or a smaller amount if the borrower so desires.
By allowing the choice of when to draw out money the adjustable offers the borrower an uncontestible advantage over the fixed in that interest accrues only on drawn out money. The rest is safely not accruing interest against the equity of the home.
This being the case there really is only one borrower that fits the profile for the fixed rate. It is the borrower who absolutely needs to take out a large lump sum immediately.
Perhaps the best candidate for the fixed option is the senior in need of paying off a large mortgage. Many times the borrower qualifies for very close to that which it takes to pay off the mortgage. Very little is left in the line of credit. The senior accomplishes a financial task and takes the conservative bet with the fixed rate.
With this in mind it's all personalities. Many will still grab that ARM but the more risk averse borrower will gravitate to the fixed. Keep in mind the fixed rate today is only slightly higher than the fifteen year average for the adjustable. - 15224
Conversation eventually makes its way to the mortgage options for them and more particularly the interest rate. The truth is that the ARM makes sense for most seniors.
This always makes me smile a bit because when I spring it on the prospective customer, I know they will have a bit of a conniption until I have a chance to fully explain why. Then they reach acceptance.
The biggest problem with the fixed rate, in the reverse mortgage business, is it does not offer the customer a line of credit option. The borrower is forced to immediately draw out that which the customer qualified to receive, or a smaller amount if the borrower so desires.
By allowing the choice of when to draw out money the adjustable offers the borrower an uncontestible advantage over the fixed in that interest accrues only on drawn out money. The rest is safely not accruing interest against the equity of the home.
This being the case there really is only one borrower that fits the profile for the fixed rate. It is the borrower who absolutely needs to take out a large lump sum immediately.
Perhaps the best candidate for the fixed option is the senior in need of paying off a large mortgage. Many times the borrower qualifies for very close to that which it takes to pay off the mortgage. Very little is left in the line of credit. The senior accomplishes a financial task and takes the conservative bet with the fixed rate.
With this in mind it's all personalities. Many will still grab that ARM but the more risk averse borrower will gravitate to the fixed. Keep in mind the fixed rate today is only slightly higher than the fifteen year average for the adjustable. - 15224
About the Author:
A far more detailed discussion of ARMs versus static rate mortgages can be found at the the reverse mortgage guide of Texas. Questions, answers and reverse mortgage facts in Texas can be obtained by click this link.
