If all else fails in the economy at least we can turn the TV on and see how interest rate continue to decline in the Fed's effort to stimulate the economy.
I'm getting calls from would-be reverse mortgage customers asking me how the dropping interest rates affect the amount of money a lender would lend to them.
Much to their shugrin I explain that rates have gone the other way.
It is true interest rates are extremely low. The main index used for reverse mortgage adjustable rate products is now down to .45%. However, there are more things at work here.
The big reason rates are actually coming up is reverse mortgage investors want more profit out to these loans.
You gotta have people investing or the whole deal goes caput. So, profit margins increased by one percent in the last week.
It's not a small increase, at least at one time. Margins have been creeping up at 1/4 point at a time.
There are a pair of important affects the rate increase will have have. To begin higher interest rates increase the rate at which the homeowner loses equity.
And secondly, would-be borrowers will receive smaller loans.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
How mortgage companies go out of business, as we know from recent financial trouble, is when more is owed than the home is actually worth.
Lending laws don't allow lenders to come after the owners or owner's heirs for the difference. They are stuck with the home value as collateral.
Reverse mortgage borrowers planning on closing in the next thirty days will be getting some bad news from their lender. They've already been assured about how much money they will get.
Many of these folks are banking on being able to refinance their forward mortgage thereby dumping that big monthly payment. This may no longer be possible.
These tough times are hitting everyone. - 16955
I'm getting calls from would-be reverse mortgage customers asking me how the dropping interest rates affect the amount of money a lender would lend to them.
Much to their shugrin I explain that rates have gone the other way.
It is true interest rates are extremely low. The main index used for reverse mortgage adjustable rate products is now down to .45%. However, there are more things at work here.
The big reason rates are actually coming up is reverse mortgage investors want more profit out to these loans.
You gotta have people investing or the whole deal goes caput. So, profit margins increased by one percent in the last week.
It's not a small increase, at least at one time. Margins have been creeping up at 1/4 point at a time.
There are a pair of important affects the rate increase will have have. To begin higher interest rates increase the rate at which the homeowner loses equity.
And secondly, would-be borrowers will receive smaller loans.
The very fact that higher interest rates for the reverse mortgage takes away equity quickly is the reason lenders lend less money.
The home's equity is the lender's financial security. This being the case they have to loan less when rates are higher.
How mortgage companies go out of business, as we know from recent financial trouble, is when more is owed than the home is actually worth.
Lending laws don't allow lenders to come after the owners or owner's heirs for the difference. They are stuck with the home value as collateral.
Reverse mortgage borrowers planning on closing in the next thirty days will be getting some bad news from their lender. They've already been assured about how much money they will get.
Many of these folks are banking on being able to refinance their forward mortgage thereby dumping that big monthly payment. This may no longer be possible.
These tough times are hitting everyone. - 16955
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