Fannie Mae Bumps Rates for Reverse Mortgage by Week's End
When going forward with a reverse mortgage the borrower has multiple options. The line of credit is, by far, the number one option and for good reason.
What I'm referring to here is the fact that this week, the margins charged by reverse mortgage lenders nationwide will increase a half percent or more.
What the heck is a margin? I was getting to that. The margin is the profit built into the loan by the bank and those that would put their money into mortgage backed securities.
The line of credit based on the constant maturity treasury index is what almost all borrowers of a reverse mortgages were using if the went forward with a reverse mortgage with a line of credit.
A couple of days ago the lender's marginal charge (banks profit) was 1.75%. The constant maturity treasury index rested at a .40%, the total of these is 2.15%. This would be the real rate of interest on the loan.
We received word yesterday that Fannie Mae, the body securitizing these loans on the secondary market, has indicated this margin is going up a minimum of 1/2%.
The effects on borrowers will be fairly limited. We've had the good fortune of rates being so low they are below the FHA floor rate which determines how much money a borrower may cash out.
How much a senior is loaned and interest go hand in hand. A loan will be higher if the interest is lower. It goes the other way as well until the ground FHA rate is reached. Then any interest rate less than that rate will not make the loan higher.
We are luckily a good bit under the floor FHA rate, and the margin going up will not throw seniors above it. So if you were given a loan quote last week, it is still okay to go by that.
What will happen is the equity will evaporate slightly more rapidly due to the margin being raised. This isn't the best thing about a reverse loan, but not having to pay the mortgage company every month helps.
The downside is interest is accruing against the equity of the home. The higher margins will simply make that interest accrue a little quicker.
What I'm referring to here is the fact that this week, the margins charged by reverse mortgage lenders nationwide will increase a half percent or more.
What the heck is a margin? I was getting to that. The margin is the profit built into the loan by the bank and those that would put their money into mortgage backed securities.
The line of credit based on the constant maturity treasury index is what almost all borrowers of a reverse mortgages were using if the went forward with a reverse mortgage with a line of credit.
A couple of days ago the lender's marginal charge (banks profit) was 1.75%. The constant maturity treasury index rested at a .40%, the total of these is 2.15%. This would be the real rate of interest on the loan.
We received word yesterday that Fannie Mae, the body securitizing these loans on the secondary market, has indicated this margin is going up a minimum of 1/2%.
The effects on borrowers will be fairly limited. We've had the good fortune of rates being so low they are below the FHA floor rate which determines how much money a borrower may cash out.
How much a senior is loaned and interest go hand in hand. A loan will be higher if the interest is lower. It goes the other way as well until the ground FHA rate is reached. Then any interest rate less than that rate will not make the loan higher.
We are luckily a good bit under the floor FHA rate, and the margin going up will not throw seniors above it. So if you were given a loan quote last week, it is still okay to go by that.
What will happen is the equity will evaporate slightly more rapidly due to the margin being raised. This isn't the best thing about a reverse loan, but not having to pay the mortgage company every month helps.
The downside is interest is accruing against the equity of the home. The higher margins will simply make that interest accrue a little quicker.
About the Author:
Scooter to a strong California website hitting the several hugh blundersto make when getting a reverse mortgage. Another great site that answers twenty top queries regarding a California reverse mortgage is right here
posted by Debt Consolidation Loan at
5:11 PM
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