The biggest myth going about reverse mortgages is that the interest rates are too high. Nothing could be further from the truth. In fact, a reverse mortgage will probably cost you just as much or less than a standard car loan. The only additional cost to you apart from the interest is administrative costs, getting an appraisal for your home and separate legal advice.
Interest Rates for Reverse Mortgages are Low
As with a mortgage or other loan, clients can choose a fixed or variable rate. Due to current economic conditions, most financial institutions are currently recommending a variable rate as the cheaper option. With the CHIP home income plan, you can switch to a fixed rate any time you want.
As of August 25th 2011, the variable interest rate for the CHIP home income plan is just 4.75%. Fixed rates vary with time periods chosen and range from 4.9% for six months to 5.95% for five years*. The time period refers not to a repayment period, but to the period that your fixed interest rate is valid for. These rates are easily comparable to a standard consumer loan.
Remember that repayment of interest on your loan is completely optional. You truly do not have to repay any funds until you sell your home. If you do choose to repay you annual interest, you can receive an interest discount of 0.50% on your next discount review date.
Initial Setup Costs for CHIP Home Income Plan
There are three independent initial charges for getting on the CHIP Home Income Plan. The first is a recent home appraisal, which is ordered through CHIP. It can range from $175 to $400 depending on the home and the location.
The second charge is for independent legal counsel, which is required by law for those who want to sign on for a reverse mortgage. Lawyer’s fees can range from $300 to $600 depending on the cost of your lawyer. If you do not have a lawyer, we’ll be happy to recommend one in your area.
The third setup cost is legal, closing and administrative costs, which amount to $1495 and are deducted from the CHIP home income funds. This includes title insurance and title registration.
Basically, your out-of-pocket fees are for the home inspector and the lawyer, and they are dependent upon the situation and the professional involved.
What can I Use a Reverse Mortgage for?
A reverse mortgage gives you an opportunity to enjoy your retirement or make retirement plans without having to worry about money. You can truly use the equity in your home to enjoy life, help out your family, or pay down debt. A better question would be what you can’t use a reverse mortgage for.
If you want to get started with the CHIP Home Income plan, give Horizon Equity a call today.
*Please note that interest rates may change at any time, and this only reflects interest rates at the time that the blog was posted.