Fixed or Adjustable?
Both the fixed and the adjustable are great reverse mortgages, but before you jump the gun and pronounce the fixed rate reverse the winner. There are some things to know about the adjustable.
The adjustable rate reverse is the reverse that allows you to take your money in differing ways: A line of credit, or monthly payments (either term or tenure), all cash or a combination of all methods - it is an "open-ended loan".
Both the fixed and the adjustable are great reverse mortgages, but before you jump the gun and pronounce the fixed rate reverse the winner. There are some things to know about the adjustable.
The adjustable rate reverse is the reverse that allows you to take your money in differing ways: A line of credit, or monthly payments (either term or tenure), all cash or a combination of all methods - it is an "open-ended loan".
The fixed rate reverse is a "closed-end loan" and therefore you must take all the money up front. (Which means you start to accrue interest on the entire amout borrowed)
Here’s some things to consider:
If you need the most amount of money to payoff an existing mortgage. The fixed is a good fit.
If you have a small or no current mortgage and are looking to supplement income, the adjustable is probably the best fit.
There is also a newer, lower cost HECM SAVER loan that has a lower FHA Upfront Premium. That is a wonderful fit for older homeowners who may not be living in the home for the next 20 years. The loan amounts are less (hence the reduced premium) but it works great and why borrow more than you need if it just means extra fees?
None of the HECM Reverse Mortgages have prepayment penalties, so seniors have the option to make payments on the loan should they wish to keep the balance lower.
A good ethical reverse mortgage consultant can help you to decide which is best for you. Fixed or Adjustable.
Here’s some things to consider:
If you need the most amount of money to payoff an existing mortgage. The fixed is a good fit.
If you have a small or no current mortgage and are looking to supplement income, the adjustable is probably the best fit.
There is also a newer, lower cost HECM SAVER loan that has a lower FHA Upfront Premium. That is a wonderful fit for older homeowners who may not be living in the home for the next 20 years. The loan amounts are less (hence the reduced premium) but it works great and why borrow more than you need if it just means extra fees?
None of the HECM Reverse Mortgages have prepayment penalties, so seniors have the option to make payments on the loan should they wish to keep the balance lower.
A good ethical reverse mortgage consultant can help you to decide which is best for you. Fixed or Adjustable.
Deborah Nance
Your Local Southern California Reverse Mortgage Professional
Good post, Deborah. I too specialize in reverse mortgages (in MN) and get frustrated that people assume the fixed rate is the best option just because they are afraid of the adjustable rate on forward loans. We have a ways to go to educate people. Keep up the good work.
Hi Beth, Thank you for commenting on my post! I love the adjustable for the "open ended" nature of it. I also love the new SAVER reverse.