Tips For Finding Affordable Reverse Mortgages Rates
Due to the qualification standards, reverse mortgages are usually available exclusively to seniors. In order to obtain a reverse mortgage you must be over 62 years of age and have equity or full ownership in your home. This loan usually has no monthly payments and do not become due until the owner dies or vacates the home. So, with more and more seniors feeling the economic pinch, reverse mortgages having increased in popularity of the past 5 years. Still, reverse mortgages should not be entered into lightly. When shopping for an affordable reverse mortgage rate here are a few tips that you should consider.
In order to find an affordable reverse mortgage rate, you need to know that the interest rate is just as important in a reverse mortgage as it is in any other mortgage. Since reverse mortgages typically do not have monthly payments, some seniors are led to believe that the interest rate is not as important. This is far from the truth. Although, no monthly payments are being made interest is accruing on the loan. So, the interest rate will play a huge part in the amount that the heirs are left to pay.
Shop around to ensure that you are getting a good lender. What initially seems like a good rate can turn into a costly lesson learned with the wrong lender. Reverse mortgages are often confusing and difficult to understand. Once you couple this with the initial charges and other potential fees, you can end up paying a lot more and receiving a lot less. If you are considering a reverse mortgage then you should visit the National Reverse Mortgage Lenders Association (NRMLA) website. The lenders on this site abide by a code of ethics established by NRMLA.
Start tracking reverse mortgage rates in your areas as you start consider obtaining a reverse mortgage. Reverse mortgages have both fixed rate and adjustable rate plans. So tracking rates to see what will work best for you is smart. This will give you a general idea of which way rates are going before you lock in. So, you can potentially hold off if rate are going up and pounce on the opportunity if rates are going down. Knowing the current interest rates and the direction that rates are traveling will afford you a firmer footing once you settle on a lender. There are several rate tracking resources out online. Be sure to choose one that you feel comfortable with and understand.
Have an idea of how you plan to use the funds. Believe it or not, this may have a huge bearing on your decision to choose a fixed or adjustable rate. Some fixed rate reverse mortgages will require you to with draw all of the funds at once, causing the loan to start accruing interest immediately. While adjustable rates, often come with monthly payments made to you and or a line of credit; so you are accruing interest as you use the money.
Know what affordable means to your heirs. Remember, the loan becomes due when you the borrower dies or decides to sell the home. Although you can put off selling the home, these loans generally come with a requirement that heirs pay off the loan in one year. This is not an issue when the home can be sold and the proceeds cover the amount of the loan. But, if the market takes a downturn then your heirs will need monthly payments that they can afford. When choosing an adjustable rate reverse mortgage, make sure there is a cap on how high the interest rate can go. Initial low rates may matter very little if there is no cap to prevent rates from rising drastically.
If possible give yourself time to act on the right opportunity. If you are using the funds to remodel, repair, or pay off an existing mortgage, do not rush in to any particular rate before seeing whether or not rates will be reduced even lower. Most seniors find themselves taking out a reverse mortgage in order to cover living expenses, hospital bills, or similar expenses. The key here is to be proactive. Do not wait until you have no other choice before trying to find an affordable reverse mortgage rate, as you will probably find yourself tied to an unfavorable rate.
Finding an affordable reverse mortgage rate is in many ways more daunting the obtaining a mortgage for a more traditional loan. Simply because there are a lot of long term issues to consider that most borrowers fail to realize, since they will probably not be the ones to pay off the loan. Yet, if you do your homework, you can surely find a reverse mortgage plan thats right for you.