HappySeniorHomeOwners Blog

Just so you get a better understand of how a  Reverse Mortgage  works.

There is only one FHA Reverse Mortgage Program nationwide.  The "HECM". (Home Equity Conversion Mortgage).  It was created by an Act of Congress in 1989, Developed by the Dept of Housing and Urban Development (HUD) and Insured by the Federal Housing Administration (FHA).

Within that Program each authorized Lender can offer a: 1) Fixed interest rate Plan and 2) a Variable interest rate Plan. Within each Plan there may be different rate levels.

The lower the interest rate the more proceeds you would receive at closing.

Now, before you jump at the mention of the "villanous" 7 letter word "variable rate, please note that since there are no mortgage payments to be made, your "pocket" does not "feel" it.

What It does affect, is the amount of interest that accrues each month to your debt.

Depending on your particular circumstances and needs, one Plan might be better than the other. I can help you determine which Plan is best for your needs.

The proceeds you receive are determined by 1) the age of youngest borrower (over 62)  2) the interest rate,  3) the value of your home and 4) the FHA's Maximun Lending Limit ( in most areas is $625,500; more in others). This Limit is temporary through 2010.

This does not mean that if your home is worth $200,000, the Reverse Mortgage's formula will consider the value as $625,500. It will consider the $200k and your age and interest rate.

It does mean that if your home is worth $800,000, $1,000,000 or more, the  Reverse Mortgage's formula will consider the maximum value of $625,500.

Since interest rates can not be "locked" until 2 days before closing, any prior increase would result in a smaller amount at closing. A lower rate would result in a higher amount at closing.

Fixed rates are locked for the life of the loan. Variable rates are locked for the first month of the loan and will vary monthly, with a lifetime cap.

Again., which is best for you? Let me analyze your situation and present an Estimate for your consideration.

For most answers visit http://HappySeniorHomeOwners.com   (English & Spanish)