As predicted, the average HECM borrower will see their initial benefits decline by $2,500 today. But next week may show an improvement, the 10-year Treasury is down nearly an eighth so far today.
This week only Treasury-based HECM’s with a margin of +233 or less can pay the HECM maximum Principal Limit. Ditto for LIBOR-based HECM’s with margins of +224 or less. Current margins are higher than these figures. This week fixed-rate HECM’s range from 5.56% to 7.250%.
Using this week’s rates, the first table shows max rates or margins before the next drop in the Principal Limit factor. The percentage drops in the table are for a 74-year old borrower (the average HECM age). How to read the table:
- A 5.81% fixed-rate HECM gives 3.0% less than the max HECM benefit.
- A 3.00% margin HECM LIBOR gives 10.1% less than the max HECM benefit.
- A 3.50% margin HECM Treasury gives 14.2% less than the max HECM benefit.
Again this week a L+300 dominates a T+350 — it gives a 4 .78% higher Principal Limit. And a L+275 gives a whopping 8.12% higher PL than a T+350.
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