California Reverse Mortgage Fixed Rate

Ever since reverse mortgage programs came about, they have only had adjustable interest rates. Many seniors have understandably a little gun-shy of the reverse mortgage with an adjustable rate, especially after watching the recent news on about the "danger" of adjustable rate loans. But now a fixed-rate reverse mortgage is available, as it was introduced last year by several banks. The interest rate is locked at when final loan documents are drawn and stays fixed for the life of the loan. It carries interest rates under 6%, making the fixed rate reverse mortgage an attractive option for many seniors. However, the benefits come with a few caveats.

The reverse mortgage fixed rate program requires that the senior cash out all the funds that they qualify for immediately at the closing of the loan. There is no line of credit, monthly income payments available. For seniors who have a large mortgage to pay off, or for those who have as use for the money, this disadvantage matter little. But if the fixed rate reverse mortgage is for a senior who owe little or nothing on their house and only need a small additional income, the immediate cash-out has some real disadvantages.

For example, if the senior is must cash out all of the funds up front, then the loan interest will be multiplied by the full loan amount from the very first day and on for the life of the loan. The adjustable rate reverse mortgage, on the other hand, offers a monthly income in almost any amount needed that adds to the principle balance only after the money is received each month. In this way, the balance of the reverse mortgage will remain lower over the term of the loan, which means less interest in incurred. This plan will leave the senior and their heirs more equity in their house in the future.

A reverse mortgage with an adjustable rate also offers the advantage of a bigger sum of money or line of credit to the senior. If their home is valued at $225,000 and the senior is in his early 70’s, he will qualify for approximately $11,000 more with an adjustable rate reverse mortgage as compared to the fixed rate. It should be noted, however, that most seniors are not concerned about an adjustable interest rate loan. The main problem with an adjustable rate mortgage is that the homeowners’ monthly mortgage payment could rise quickly beyond what they can afford. But the reverse mortgage does not have monthly payments, so the risk does not apply. The interest may fluctuate, but with the reverse mortgage, the senior will not be affected.

The reverse mortgage with a fixed rate may be beneficial for some senior homeowners. If the fixed rate will be lower, on average, than the adjustable rate, then it is a good choice. Seniors who opt for the reverse mortgage with a fixed rate simply need to put money that they receive to good use, such as paying off a previous mortgage or by putting it into an appropriate investment.

Reverse-Mortgage-Info.net is a division of FutureSafe Financial specializing in California reverse mortgages and providing qualified reverse mortgages for seniors 62 years and older. Please contact Reverse-Mortgage-Info.net for more information and a free reverse mortgage quote.