New 'Lock' Keeps Rates Steady (on Reverse Mortgages)
The Wall Street Journal, September 12th, 2005
It's a lock.
Lenders recently began offering to lock in interest
rates on reverse mortgages, which potentially could allow homeowners to
access thousands of dollars in additional equity.
Borrowers now will know at the time they're applying
for government-insured reverse mortgages the exact amount they can
expect to receive when the loans are closed. Previously, borrowers were
given an estimated figure. If interest rates rose before loans closed,
borrowers would receive less money.
Reverse mortgages allow homeowners 62 or older -- if
co-owned, the home's youngest owner -- to sell their homes back to the
banks in exchange for set monthly payments, a lump sum or a line of
credit.
With a reverse mortgage, instead of the borrower
making payments to the lender, as they do with a traditional mortgage,
the lender pays the borrower. The borrower keeps control of the house
and doesn't have to pay the lender back as long as he or she continues
to live in the home. When the homeowner dies or moves out, the house is
sold, the lender is paid back with interest, and any money left over
goes to the homeowner or his or her estate....
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