Since the beginning of the federally insured Reverse Mortgage in 1988 when the government started regulating them, the program has gone through many changes that have not only created more security for the senior homeowner, but reduced fees and increased borrowing limits. Also not to mention increased the options that are available for the senior to choose from or change too over the years.
Unlike any other program in the mortgage industry there is no program that even comes close to the Reverse, it is designed to have the most flexibility, and the safest to all seniors who own their home and are over 62 years of age. Now in 2009 where more and more seniors are seeing the true value of a Reverse Mortgage, and that it is not just for the seniors who are poor, it is just about for everyone who is concerned with having security in these troubled economic times! Yes security simply because the statistics show the 78% of all seniors who elect to take out a Reverse Mortgage utilize the Equity Credit Line which is built into the adjustable rate program.
Now in addition; there is a program for the person who has fear of adjustable rate mortgage which is understandable they can elect to have a fixed interest rate that stays the same forever, but they must receive all of the money at the time of closing. There are no other options at this time. So I guess you are wondering why that is, well it is because of the investor market for selling mortgage backed securities. When investors are looking to invest they look for the greatest return over time, and buy investing in a fixed interest on the return and a fixed amount of the total debt there is not inflationary rate of return. As with the adjustable the rate of return can be much greater over the life of the loan, which can be upwards of 20 to 30 years depending on how long the senior lives. This is important simply because the Reverse Mortgage is a long term investment, and there are no payments over the years until the senior ceases to live in the home as their primary residence or the past away.
Over the years that the Reverse Mortgage has been in existence, the Fannie Mae has been the purchaser of mortgage backed securities of the Reverse Mortgage, but now they are mandated by the treasury to reduce the balance sheets over the next two years, so the industry bankers will be looking for new ways to attracted investors. In doing so they must be able to package up these securities and make them attractive to the investors. This will only be accomplished by increasing the margins that are charged on each loan, the higher the margin I.e. fixed profits.
For instance; today the margins that are added to the index to come up with the effective interest rate are something like this Margin 225 tied to the Libor, 250 tied to the CMT or ( Constant Maturity Treasury) or 275 CMT, just to name a few. Not to mention the fixed rate, this is regulated by the bond market just like conventional mortgages!
In the near future will see the margins start to increase to maybe 3-4-5% to make them more attractive to the independent investor who is looking for security and rate of return. See unlike traditional mortgage securities the Reverse Mortgage is a protected investment, and the reason being the lose factor is almost non-existent. The money that is loaned out the senior is insured that it will be returned to the bank over a period of years, because the one thing that is certain is that the senior is going to die at some point in the future. This is determined by the actuarial tables that also determines how much monies will be available at what age of the senior.
A person at age 62 will receive for less then a senior who is 80 years old, because the life expectancy is less for the 80 year old person then that of the 62 year old person. Remember the senior stays in the home and makes no mortgage payments of any kind until the cease to live in the home as their primary residence, by death or the sale of the home.
Flexibility
Within the Reverse Mortgage the senior is in total control as the how they receive the money from the mortgage and how the spend the money. The options are only restricted by the plan that they choose to use!
- They can take all of the money
- They can take a portion of it and leave a portion of it in the credit line
- They can take a monthly amount for a term period
- They can what is called a Tenure for life
- They can take Tenure for a portion and have credit line.
- They can change the program from time to time.
- Then can withdraw lump sums at anytime.
As you can see the possibilities are endless these are just a few ways that a senior can utilize the mortgage. Also if at anytime they decide or have the means to payoff the loan they can do so without any prepayment penalties.
TODAY'S ECONOMY
In these uncertain times unlike anytime in history it is more important to have a security instrument in place for the unexpected twist and turns that our lives may take in the future simply because of he unprecedented world of the economy. If a person does not need the funds currently they will have the option of having a credit line that is sitting in the wings, growing over time by .50% more then the interest rate of the loan balance, available to them if and when they ever need it. The one thing that we all can expect is change and that change can be dramatic and it can be devastating so if you are concerned and you are a senior homeowner over the age of 62 stop listening to uninformed people who give wrong advice and speak to a professional who understands and is knowledgeable about the Reverse Mortgage and secure your future today before the margins increase to 3-4or 5% plus the indexes and if inflation starts to come back and it will you will not be able to maximize your portfolio act now.
For details or to speak to a profession Reverse Mortgage specialist visit or call toll free to 877-463-6546 ext 215
Tim Robbins
