The decision between an adjustable rate mortgage and a fixed rate mortgage is very likely one you have debated and researched in the past when buying a home. There are many arguments for both options and discussing them can often lead to a hotly contested debate. Many people assume the same arguments apply when discussing Fixed Rate Reverse Mortgages vs Adjustable Rate Reverse Mortgages, but unfortunately, they could not be more incorrect. Fixed Rate Reverse Mortgages and Adjustable Rate Reverse Mortgages have different characteristics and features that may have an impact on your decision.
Fixed Rate Reverse Mortgages allow a borrower to choose a set interest rate that can not change. The available rates vary from lender to lender. The lower rates often come with an origination fee, and the higher rates may offer a lender credit (credits are not available on purchase loans). One downside to Fixed Rate Reverse Mortgages, is that the line of credit and monthly payment options are not available. Borrowers who choose Fixed Rate Reverse Mortgages receive a single disbursement- no additional Reverse Mortgage proceeds are available after closing.
Adjustable Rate Reverse Mortgages come with a set “margin” that is used to calculate the current interest rate. There are products available that adjust monthly, and products that adjust annually. Since June of 2014, most Adjustable Rate Reverse Mortgages now offer a 5% cap over the initial rate. There are many different ways to structure an Adjustable Rate Reverse Mortgage. With an Adjustable Rate Reverse Mortgage, a borrower can choose a lump sum (limited to 60% of available funds in the first year in most cases- contact a Reverse Mortgage Expert for more information), line of credit, monthly payments (tenure or term), or a combination of the three.
The article I’ve linked to below is a good discussion of more of the pro’s and con’s of each option, written by the Mortgage Professor, Dr. Jack Guttentag:
Contact your Florida Reverse Mortgage experts for more information!
Access Reverse Mortgage Corporation
2999 Tyrone Blvd N
St. Petersburg, FL 33710
These materials are not from HUD or FHA and were not approved by HUD or a government agency.