First New Reverse Mortgage Product in 5 years Introduced For a long time we industry specialists have been asking for this product: the Hybrid Reverse Mortgage. Before getting into the details of this new HUD approved and FHA insured reverse mortgage product, let’s remember existing products: the fixed rate reverse mortgage, typically used to pay off an existing mortgage and the adjustable rate, typically used to establish a reverse mortgage credit line.
A concern expressed by some clients, regarding the current reverse mortgage credit line product, depending on their age, is that while the interest rate on what is spent is currently in the 2% start range, the rate could increase over the life of the loan to the cap of 10 % over the start rate. The interest rate adjusts up/down monthly and is tied to a stable index, the Libor. Over the last 15 years the Libor index has gone to a high of approximately 9% and hovered in the 3-7% range predominately.
Reverse mortgage borrowers NEVER accrue interest charges on their unspent credit line funds, and they are NOT making monthly payments on money they have spent, thus there is no possibility of a fluctuating house payment, however, interest is accruing on spent funds, and the higher the rate, the higher the loan balance will be at the time of home sale. Some of my clients are unconcerned about rate fluctuations: there are no heirs who are waiting to inherit house equity; some clients are less concerned because they are already in their 80’s, and some younger clients express concern.
The introduction of the new and already popular “Hybrid” reverse mortgage credit line addresses the rate concerns. The KEY feature of this product: the interest rate on spent funds can NEVER rise more than 5% over the start rate during the entire life of the loan. Thus, with the current start interest rates in the 2% range, the rate on what has been spent from the reverse mortgage credit line will never go above the 7% range. The starting loan rate is expressed in your loan application and locked during the loan process. As space is limited here, for any questions please feel free to give me a call.
Shawna McDonald, Loan Officer has completed hundreds of reverse mortgages. She is approved with 8 of the largest reverse mortgage lenders in the nation allowing the consumer 1 stop fee shopping. Her local office, Sierra Foothills Reverse Mortgage, is located at 412 E. Main Street Suite N, Grass Valley, (530) 497-3010. The website is www.SierraFoothillsReverse.com.
NMLS #271335 BRE 00585530 Borba Investments, Auburn, CA NMLS #76801 HUD approved