Peter Bell, president of the National Reverse Mortgage Lenders Association, a group in Washington, D.C., that represents lenders and investors in the reverse mortgage business says the new option empowers seniors to tap smaller amounts of equity in a more affordable way.
“Some changes from the market, from the regulatory side and in the counseling, have really improved the value proposition for a lot of seniors from what has been the traditional perception of reverse mortgages,” he says.
While the adjustable rate product allows borrowers to take out smaller amounts of money initially, Susanna Montezemolo, vice president of federal affairs at the Center for Responsible Lending in Washington, D.C., says it may be a smarter choice because the fixed rate requires that the borrower tap the full amount of equity upfront.
“For the majority of people, it makes more sense to take out a minimum amount upfront and then have access to that line of credit, because they will owe less in interest over time,” she says.
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