The basic difficulty is, that the future forecasting is difficult or even impossible. This makes the forecasts concerning the reverse mortgage cost also difficult. However, a senior borrower has to make important choices, before he will sign the reverse loan agreement.
The key thing is to understand, what is the bigger market, which will influence on the terms of the reverse loan. We speak about the financial products, which follow the economic circumstances. To put this simply, the selling prices are bigger, when the economy is running well and another way round.
1. What Are The Drivers In The Reverse Loan Market?
Do the important drivers come from the general market or from the demand of the senior citizens? If we think, the needs of the seniors, they hardly follow the economic circumstances. These people are mostly retired and the need for an extra monthly money is big.
So it seems, that the bigger impact comes from the financial market, i.e. from the competition between the different reverse mortgage lenders. This forces the sales managers to make special offers by reducing the price of a certain reverse mortgage cost element.
2. The Impact Of The Offers.
The basic feature of the reverse loan is, that a senior will not pay back anything during the running time. This means, that all the costs will be added on the top of the previous ones. By utilizing the special offers a senior can lower the closing costs. This requires, that a senior must follow the market offers during a long time, but it is time well spent.
3. The Elements Of The Reverse Mortgage Cost.
The counselor fee is the only out of the pocket fee, others will be included into the debt. So the interest will be calculated for the whole debt capital, which means that it will be the biggest element in the closing cost. The loan shopping is the only way, on the top of some special offers, with which a senior can find the best deal. The Internet is a great tool to handle the process.
4. The Interest Rate Choice.
When the interest rate is the biggest element in the reverse mortgage cost, it is important to think it a little bit more. A borrower must select between two types, the fixed or variable rate loans. The fixed rate will be the same for the whole running time, which makes it risk free and easy to forecast.
If a borrower manages to sign a deal during a recession with an exceptional low fixed rate, that is good. The variable rate follows the market prices and can bring good results, if the present rate level is high and the forecasts are that it will be lower in the future. If the running time is a long one, it is hard to forecast the rate development.
5. What Is Essential?
In the reverse mortgage cost there are bigger and smaller elements. What will determine the closing costs is the development of the whole package. If the fixed interest rate, which a senior could get, is historically on a very low level, it is not realistic to hope to get even a lower one. The need of an extra money dictates the timing and if a senior has shopped around and located the best lender, there it is.
Juhani Tontti, B.Sc., Is An Expert Author, Who Has Followed The Market Including The Reverse Mortgage Cost Discussion, Recommends To Shop Between Different Reverse Mortgage Lenders To Get The Best Deal. Visit: Reverse Mortgage Cost
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