| Reverse Mortgages: The Choices Expand
Only a year ago, homeowners interested in reverse mortgages had little to choose from beyond the plain-vanilla, government-backed products that have long dominated the market. Such mortgages essentially allow homeowners at least 62 years old to sell a large chunk of their home equity back to a bank or other lender in exchange for a lump sum, monthly payments or a line of credit. Now, nearly a dozen large banks and mortgage lenders have launched reverse-mortgage products with lower fees and larger payouts. One lender has reduced the minimum age requirement to 60; others are making loans on second homes and vacation rentals. "Jumbo" reverse mortgages -- for houses valued at as much as $10 million -- are becoming more common. With a reverse mortgage, instead of the borrower making payments to the lender, the lender makes a payment or payments to the borrower.
The Fed is on your side
Since the Fed rate affects how much consumers pay on credit card debt, home equity lines of credit and auto loans, consumers' monthly debt obligations should slide along with the rate cut. For home owners with home equity lines of credit, it shouldn't be long before they see lower monthly loan payments. "That rate will drop three-quarters of a percentage point fairly soon," said Holden Lewis of Bankrate.com. "Probably in about two billing cycles." The Fed's dramatic rate cut - its largest since 1984 - won't do much to help consumers with their credit card debt, however. According to Bill Hardekopf, chief executive of LowCards.com, credit card issuers may choose to lower their annual interest rates by three quarters of a point. However, for a balance of $5,000, that amounts to only $3.13 a month.
Banks See Spike In Refinancing Applications
MADISON, Wis. -- Refinancing applications have surged 17 percent after interest rates dropped three-quarters of a point in the past week -- and they could go lower. VIDEO: Watch The Report But financial experts said it is important to know when it's best to refinance and if the type of loan a consumer has is even affected by this week's federal rate cut. Don Bertucci, AnchorBank's senior vice president of residential lending, said the last few days have been hectic. He said the phones have been ringing and the online applications have been coming in, all in response to this week's rate cut by the federal reserve. So, what does the 0.75 percent rate cut mean for residents? "It would affect mostly second mortgages or home equity lines of credit, where the rate is adjustable," Bertucci said.
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