Should Seniors Take Advantage of Today’s Low Reverse Mortgage Rates?

On a forward mortgage loan, a borrower’s interest rate will impact the size of his or her monthly payment. Since reverse mortgagees do not make monthly payments to their lenders, interest rates may seem unimportant. Reverse mortgage rates, however, actually do play a very important role in the loan process. As with any type of loan, the interest rate determines how much interest will accumulate over the life of the reverse mortgage. The lower the borrower’s interest rate, the less he or she will owe once it comes time to repay the loan.

Interest rates also affect borrowers’ payouts. When lenders calculate payouts, they take several factors into consideration. The main factors are the borrower’s age, amount of equity, property value and interest rate. This is to ensure that at the end of the loan borrowers will not owe more than their home is worth. A lower interest rate means that less interest will accrue, which ultimately means that borrowers are eligible to receive more from their home equity. So while reverse mortgage rates may seem less important than forward mortgage rates, getting a low rate will have a significant impact on the loan.

Good News for Reverse Mortgage Rates

While many homeowners have not had it easy, the past few years have been great for borrowers. Interest rates have hit record lows, and borrowers have been able to lock-in some great deals. Fortunately, reverse mortgage rates are not expected to rise anytime soon. According to a statement released on January 25th, the Federal Reserve expects interest rates to remain low through 2014. This is primarily due to high unemployment rates and a depressed housing market that has yet to see much recovery.

The Federal Reserve’s statement makes it clear that seniors have a few more years to take advantage of today’s low reverse mortgage rates. For consumers waiting to turn 62, this should come as great news. Seniors who are still on the fence will also have a few more years to decide whether a reverse mortgage is their best option. While seniors might want to act soon, increasing rates are not an immediate concern.

Is Now the Best Time to Get a Reverse Mortgage?

Unfortunately, according to RealtyTrac, a popular real estate website, the housing market will not see much recovery until around 2014. Many real estate professionals believe it will take much longer than that to see significant recovery. Some are also convinced that housing prices will never reach what they were prior to the housing market crash in the mid to late 2000’s.

Seniors who are waiting for their home to appreciate might notice reverse mortgage rates rising right along with their home’s value. It is also possible that seniors might have to wait a very long time for their home to substantially increase in value. For these reasons, seniors should not base their decision to get a reverse mortgage on external factors. Instead, seniors should base their decision on the urgency of their financial needs. For seniors struggling to get by on a limited income, a reverse mortgage might be hugely beneficial. While today’s low reverse mortgage rates do not entirely make up for depressed housing prices, they do help seniors get a good deal on a loan.