Learning the Advantages and Disadvantages of Variable Rate and Fixed Rate Reverse Mortgages

Reverse mortgage is the borrowing agreement for retired individuals which lets them utilize the equity they are able to build up in their homes to obtain the desired retirement funds. If you are about to retire from your employment and you are interested in getting a reverse mortgage, then you need to know the eligibility requirements of this kind of loan. The basic qualifications among all lending companies are all similar although some other policies and regulations can be different.

Eligibility rules aside, learning the different kinds of reverse mortgage such as the fixed rate and the variable rate is equally essential. Please read on to know what fixed rate and variable rate mortgages are.

In the process of comparing one type of reverse mortgage to another, there are some factors which must be put into consideration before you can decide which of them is best to take. Fixed rate mortgage is more popular than the variable rate because most people do not want to be paying with interest rates that grows over time. However, there are also some pitfalls lying behind the fixed rate which every applicant must consider.

The variable rate reverse mortgage, on the other hand, sounds disadvantageous because the interest rate is fluctuating from time to time. But then again, when you spare a bit of your time in checking out this kind of borrowing, you will discover some advantages which might change your mind and make you prefer it.

Being charged of a fixed rate for the entire life of the loan can be an advantage at one point but it can also be some reverse mortgage disadvantages on the other side of the coin. If you were to opt for a fixed rate reverse mortgage option, then at least decide to have the funds released to your in a lump sum method or in a one-time payment. It would be ideal to pick a reverse mortgage that is a fixed rate type if you need to pay off the total amount of debt you are owing for the home.

On the other side of the coin, the reverse mortgage that has a variable rate do not let you tell the exact amount of interest you will be charged of since the rates are fluctuating, but this can also be an advantage especially if you have with you an aarp reverse mortgage calculator. The good thing about a variable rate reverse mortgage is that you can exercise your freedom of choice as to what payout method you want the reverse mortgage funds to be distributed to you. Somehow, choosing a variable rate reverse mortgage can be advantageous if your check your need and personal financial situation properly.