The good news for seniors looking into a Home Equity Conversion Mortgage in 2016 is that interest rates on these loans are still very low as of February 6, 2016. Rates have been fluctuating wildly over the last few months; seniors who are serious about getting the lowest reverse mortgage rates should take action asap. Not to mention financial assessment will make getting the lowest rate even harder now is the time to take action.
I have an existing mortgage balance…
You can very well reduce the amount of interest you will pay on your mortgage by getting a reverse mortgage at a lower interest rate. This is a no-brainer move if you are going to stay in your home for a minimum of five years. Most likely the reverse rate is going to be much lower than your existing loan making this a good move. If there is more value left after paying off your current mortgage (there won’t be a mortgage payment with a reverse), you may potentially have access to those funds.
I own my home free and clear…
If you do not have a mortgage but are looking for cash in your retirement with extremely low rates, you can borrow for cheap through the HECM program. For most, the home value will appreciate enough to cover any interest costs as the loan increases over time and thus protecting the equity that has not been touched. Many seniors are now considering taking a reverse mortgage to boost their retirement income, pay off any debts, or to be able to live in the home until they are ready to pass away. If home values increase as expected, this will essentially mean you can borrow at even lower rate when you factor in this offsetting to the rate charged on the reverse.
The interest rate you receive on your reverse mortgage loan will be to most important factor to determine how much you will be able to borrow. Also how much interest will accrue and be due when the borrowers pass and or sell the home.
Just as with a forward mortgage (think of a refinance) where you would want to secure a low fixed rate this is the same concept with the reverse mortgage. The higher the interest rate, the less money you can take out with a reverse mortgage. Choosing the wrong interest rate or program can be detrimental to an average seniors retirement, hence our focus in helping making those decisions of which loan to pick (and which rate to take). Reverse mortgages are not easy to understand, and the loan applications are very long, give us a try to help you figure out how to get the best rate.
The HECM lenders will be giving you a portion of the home’s equity upfront at a pre-determined and agreed rate (and under the program payout you choose as well). This varies wildly from bank to bank; this is where we started from with the concept of comparison shopping top HECM reverse mortgage banks to secure you the lowest interest rate possible.
Current HECM Reverse Mortgage Rates 2016
HECM fixed reverse mortgage: lowest rates 4.5%
HECM fixed saver reverse mortgage: lowest rates 4.75%
HECM libor ( adjustable ): lowest rates 2.5%
HECM Saver Libor ( adjustable ): lowest rates: 2.50%
servicing fee: $0 ( some lenders charge $15-30 month which adds to thousands over loan life)
FHA lending limit: $625,000 for 2016 ( Federal Housing Administration )
Total Interest Rate charged (APR) to a reverse mortgage is the Margin + Index + Monthly Mortgage Insurance of 1.250%.
The HECM rates will allow you to compare loans with other lenders, it will ultimately determine your borrowing costs, how much money you will receive (upfront or for lifetime income), and whether it is a good time even to consider getting a reverse mortgage. As of february 6, 2016 rates are still at all time low’s so it is still recommended that seniors consider the reverse mortgage loan option now as locking in a low rate will save you or allow you to keep more equity.
Besides the interest rate, you should consider the origination fees involved with your loan as some lenders will not charge you an origination fee. There are no free lunches and even lenders who don’t charge an origination fee will find ways to charge for their service – typically by charging a higher rate.
*** Trying to perfectly to time the interest rates market can backfire – we can advise that when rates are as low as they are they usually, or they can only increase from here – a .25% interest rate difference can lead to substantial savings long term. This is becoming a reality as interest rates are increasing and are no longer at an all time low. As the recession ends, there is a high chance that mortgage rates for all programs start to increase. ***