Reverse Mortgage Information
A Reverse Mortgage is a tool that can help you use the equity in your home to fund your everyday living expenses, allowing you to bridge the Social Security gap. Reverse mortgages will help cover the everyday costs that can make life very uncomfortable for a retiree that is on a fixed income. By using the additional income that is generated, you can supplement your Social Security income.
There are two types of reverse mortgages. The most common is the government insured, FHA reverse mortgage. It is known as the HECM (pronounced Heck-um). The other type of reverse mortgage available is a proprietary product offered at different times by a few different lenders. The purpose of non FHA reverse mortgages is to cover loans that exceed FHA limits or don't meet FHA guidelines. Currently, there are no proprietary (non FHA) reverse mortgages available.
There are several types of HECM loans. the programs listed below are the most common but there are occasionally some changes in the market that will add or remove programs.
1. LIBOR
Currently the programs available on the LIBOR products are:
1. HECM LIBOR 325
2. HECM LIBOR 350
3. HECM LIBOR 375
The numbers after the word LIBOR are reflecting the margin associated with the loan. For example, to calculate the interest rate on a LIBOR 350, you could look at the 6 month LIBOR rate on a financial site like Bloomberg or MSN and add 3.50% to it. This will give you your interest rate. All LIBOR reverse mortgages are adjustable.
2. CMT
CMT products are not such a good option right now, but there are some lenders still offering them. Currently the programs available on the CMT reverse mortgage products are:
1. HECM CMT 375
2. HECM CMT 400
3. HECM CMT 425
As stated above the number part (of the program name) is the margin tied to the loan. This time though, we will look up the 1 YR Treasury and add the margin to it. All CMT reverse mortgages are adjustable.
The loan that seems to generate a lot of interest is the next HECM loan. It got a lot of people over their fear of a reverse mortgage.
3. HECM FIXED
The only way to see what the rate is, is to ask a lender. You can see the fixed rate for a reverse mortgage on our website. This rate changes daily, and can not be advance locked. This rate floats until you get loan documents to sign. Then it is fixed for the life of the loan.
There is a small downfall to the HECM FIXED programs. It is that all money must be taken up front. Where the adjustable programs allow for a Line of Credit or a monthly income, the fixed must be taken as a lump sum. This is not a bad thing, but you should be aware of it.
4. JUMBO REVERSE
We do have a jumbo reverse mortgage. It is new on the market. With the new HECM limits at $625,000, the jumbo really starts to benefit you when the value of the home is 1.5 million or more. If your home is somewhere between the HECM limit and where the jumbo benefits you, call us. We may have a solution.
Want to know more about what Redwood Financial Services and a reverse mortgage can do for you? Request your free reverse mortgage information to see how a reverse mortgage would have the greatest impact on your retirement.
