Adjustable Rate Reverse Mortgages
Looking to retire worry-free and never make a mortgage payment again? An adjustable rate reverse mortgage may be the solution to your problem. If you’re wondering what an adjustable rate reverse mortgage is, read on for all the information you need to understand your borrowing options when it comes to reverse mortgages.
What is an Adjustable Rate Reverse Mortgage?
A reverse mortgage is a loan that allows borrowers to draw on the equity in their home. One significant benefit of applying for a reverse mortgage instead of a traditional loan is that income and credit score requirements are often unnecessary. The home is being used as collateral, so there is no need for the lender to scrutinize the creditworthiness of the borrower. New changes require this and financial assessment (i.e. credit, income, asset, debt)
Reverse mortgages are specifically available to homeowners who are at least 62 years of age. The home must be the homeowner's primary residence, and the homeowner should plan on living in their home for a long period of time. Homeowners may not be required to make payments on the loan, but the balance can go over the value of the home which is why mortgage insurance is required.
An adjustable rate reverse mortgage is a type of reverse mortgage that has a variable interest rate. This means that the interest accrued on the loan may change with market rates. The primary benefit of opting for an adjustable rate reverse mortgage is that the proceeds of the loan can be taken out in increments. Borrowers can take out a one-time lump sum if they would like, but there are also options to draw funds as needed with a line of credit or to receive a set amount each month.
Adjustable Rate Reverse Mortgages vs. Fixed Rate Reverse Mortgages
While you may be familiar with reverse mortgages, you are probably wondering about the issue of adjustable rate vs. fixed rate reverse mortgages. Each of these reverse mortgage options has benefits and disadvantages. Review the differences between the two before deciding which is best for your unique situation.
Adjustable Rate Reverse Mortgages:
Allows you to draw from the reverse mortgage as often as you wish
The Interest rate may adjust monthly according to changes in the LIBOR index
Fixed Rate Reverse Mortgages:
Require borrowers to take proceeds as a lump sum
Interest rate remains the same throughout the life of the mortgage
Fixed rate reverse mortgages have the potential to cost borrowers less in interest, but adjustable rate reverse mortgages offer more flexibility. If you are considering an adjustable rate reverse mortgage, you can ease some of your worry about variable interest rates. The rate is capped at 10 percent over the original rate.
Federal Housing Administration Mortgage Insurance
The Federal Housing Administration, most commonly known as the FHA, provides insurance to FHA approved lenders. It is the largest Government backed insurer of mortgages in the world since it was founded in 1934.
FHA mortgage insurance provides FHA approved lenders protection from homeowners defaulting on their mortgage loans. The FHA will pay the lender a claim in the event of a homeowner’s default.
It's easy to qualify for a monthly tenure reverse mortgage. Borrowers need to meet a few basic requirements:
Aged 62 or older (at least one spouse)
Significant equity in a primary residence
Complete a HUD-approved financial counseling session, which may be done on the phone
A desire for financial flexibility and freedom throughout retirement
How To Get an Adjustable Rate Reverse Mortgage
Whether you need money to renovate your home, buy a new car, or pay for monthly necessities, a San Diego adjustable rate reverse mortgage is within your reach. You can discuss the qualifications with a loan officer before applying for a reverse mortgage to ensure that you meet the criteria. Do you want to learn more about your reverse mortgage options? Contact a knowledgeable Certified Reverse Mortgage Professional (CRMP) today!