Below are current reverse mortgage loan rates. If you have any questions about the rates, please don’t hesitate to call 1-888-888-4834 or Request a NO Obligation quote.
Rates and Fees are subject to change without notice. These rates are for comparison purposes only. This is not an offer or commitment to lend at any set terms.
As you can see above, there is a range shown for all rates. The reason for that is we give you the option to choose the best rate that best suites your individual situation. The general rule of thumb is that the lower the rate, the higher the origination fee will be. It’s a lot like “buying the rate down” on the forward side. When we discuss your scenario over the phone, we will give you all the details that go along with each rate, which includes a breakdown of all fees involved. Use our reverse mortgage calculator to see an estimate of what’s available to you.
The Total Interest Rate charged to a reverse mortgage loan is equal to the Margin + Index + Monthly Mortgage Insurance of 0.50%
Expert Tip #1: If you are comparison shopping reverse mortgages between multiple lenders, it is best to make certain that you provide the same information to all lenders so that you get an apples to apples comparison. It also best to make sure that you compare quotes prepared within the same week (Tuesday-Friday would be ideal as rates are updated late Monday afternoon and in effect on Tuesday). We are happy to review all quotes that you’ve received and will make every effort to meet or beat your best offering.
A reverse mortgage is a unique financial product that allows homeowners aged 62 and older to convert a portion of their home’s equity into cash. With a reverse mortgage, you can receive funds without having to sell your house or pay additional monthly bills. The loan only needs to be repaid when you permanently move out, sell the home, or pass away.
Reverse mortgages have become an increasingly popular option for seniors looking to supplement their retirement income. However, these loans come with complex terms and conditions. One key aspect you need to understand is the interest rates on reverse mortgage loans.
In this comprehensive guide, we’ll explain what you need to know about reverse mortgage interest rates, including:
- How interest rates impact your loan amount and costs
- What drives fluctuations in reverse mortgage rates
- Strategies to find and lock in the best interest rate
- Alternatives beyond reverse mortgages
How Interest Rates Affect Your Reverse Mortgage
Interest rates have a dual impact on reverse mortgages. Firstly, the rate influences how much money you can borrow – called the principal limit. Each month, lenders set a principal limit factor based on your age, home value, and the current interest rate. A higher rate reduces the funds you can access.
Secondly, the interest rate determines how quickly your loan balance grows. Reverse mortgages accrue interest over time, and this interest is added to the principal. A higher interest rate means your total debt grows faster.
For instance, a 5% rate results in slower growth of your loan balance compared to a 7% rate. This difference affects the total amount owed when the loan becomes due for repayment. Understanding this dual role of interest rates helps you make informed borrowing decisions.
What Drives Fluctuations in Reverse Mortgage Rates
Reverse mortgage rates fluctuate periodically, just like regular mortgage rates Being aware of the factors that influence rate changes allows you to find a competitive interest rate Here are some key elements that impact reverse mortgage loan rates
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Economy and housing market: Rates tend to rise during strong economic growth when demand for mortgages increases. Rates fall when the economy slows down.
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Federal Reserve policies Actions by the Fed to adjust interest rates can lead to changes in mortgage rates
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Lender policies: Each reverse mortgage lender may set rates based on their business goals. Comparing quotes from multiple lenders can help find lower rates.
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Loan type: Interest rates can vary based on the loan program. Popular options include federally-insured HECM loans and proprietary reverse mortgages offered by private lenders.
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Credit profile Borrowers with higher credit scores may qualify for lower interest rates on their reverse mortgages
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Home value: For high-value homes, lenders may offer more competitive interest rates on reverse mortgages.
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Age: Older borrowers may receive relatively higher interest rates on their reverse mortgages.
Regularly monitoring these factors provides key insights on rate trends, allowing borrowers to time their application appropriately.
Strategies to Find the Best Reverse Mortgage Interest Rate
Finding a reverse mortgage with the lowest interest rate takes research and strategic planning. Here are some tips to secure a competitive rate on your loan:
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Compare quotes from multiple lenders. Interest rates can vary significantly between different reverse mortgage lenders. Shop around for the best deal.
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Ask about discounts. Some lenders may offer interest rate discounts for enrolling in automated payments or combining your reverse mortgage with other accounts.
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Consider alternatives to HECM. Although popular, HECM reverse mortgages may not always offer the lowest rate. Proprietary programs from private lenders are worth exploring.
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Improve your credit score. Just like traditional mortgages, a higher score may qualify you for a lower interest rate on a reverse mortgage.
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Time your application. Monitor rate trends and apply when they are favorable. Consider locking in your rate for 30-60 days.
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Negotiate fees. Reduce other closing costs to lower the overall effective interest rate.
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Consult a reverse mortgage counselor. An expert can guide you in finding the optimal loan program and interest rate for your specific financial situation.
With the right preparation and research, you can identify a reverse mortgage that offers the lowest possible interest rate.
Alternatives Beyond Reverse Mortgages
Although popular with seniors, reverse mortgages are not the only option to tap home equity. Comparing the pros and cons to alternatives can help determine if a reverse mortgage aligns with your financial goals. Here are some other possibilities to consider:
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Home equity loan: This option lets you borrow against your equity and receive funds in a lump sum. Interest rates are fixed but payments are required.
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Home equity line of credit (HELOC): A HELOC provides flexible access to cash as needed. However, interest rates are variable.
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Cash-out mortgage refinance: You can refinance your existing mortgage to a lower rate and withdraw equity as a lump sum. Closing costs apply.
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Downsizing: Selling your current house and moving to a smaller property can provide funds to live on. However, moving costs apply.
Compare interest rates, costs, loan amounts, and risks to choose the most suitable home equity release option for your needs.
Key Takeaways on Reverse Mortgage Interest Rates
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Interest rates affect the loan amount you can borrow and the total costs. Higher rates reduce proceeds but increase overall debt.
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Factors like economic conditions, lender policies, loan types, credit profile, home value, and age impact reverse mortgage interest rates.
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Comparing lender quotes, negotiating fees, improving credit, and timing your application can help secure a low rate.
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Alternatives like home equity loans, HELOCs, and refinancing may better suit your financial situation.
Carefully evaluating interest rates allows you to determine if a reverse mortgage aligns with your retirement income goals. Consider both the amount you need upfront and potential costs down the line. With thorough research and comparison of options, you can make a well-informed decision.
Adjustable Rate Reverse Mortgage Loan Solutions:
Adjustable rate reverse mortgage loans have by far been the most popular reverse mortgage loan to date. There are two types of adjustable rate reverse mortgage loans. Annual and monthly adjustable. The annual has an interest rate that adjusts once a year and is based on the 1 Year CMT, while the monthly has a rate that adjusts every month and is based on the 1 Month CMT. The month adjustable HECM is our most popular product due to market conditions.
Expert Tip #2: When shopping for a reverse mortgage, it is best to compare all program options before making a decision. While most customers we speak with initially want a fixed rate, most find the flexibility of an adjustable best suits their needs.
The Constant Maturity Treasury (CMT) Index is derived from the average monthly yield of various Treasury Securities, which are adjusted to reflect a constant maturity equivalent to one year.
This index is calculated by the U.S. Treasury, which establishes the yields for Treasury securities at a constant maturity. These yields are determined based on the daily yield curve, which in turn is derived from the closing market bid yields of Treasury securities that are actively traded in the over-the-counter market.
In September 2020, GNMA declared that it would discontinue the use of the LIBOR index for HECM loans starting February 1, 2021. As a result, lenders swiftly transitioned to the CMT index. The intention was to eventually adopt the new SOFR index as a replacement for LIBOR, but due to the SOFR index not being ready in time, the interim solution was to revert to the CMT index to phase out LIBOR.
The SOFR, or Secured Overnight Financing Rate, represents the cost of borrowing cash overnight with Treasury Securities as collateral, designed to be immune to the manipulation issues that plagued the LIBOR. The discovery of LIBOR’s vulnerability to manipulation led to its abandonment as a benchmark for adjustable-rate loans and triggered a significant antitrust lawsuit. Presently, more than a dozen individuals are facing trials for severe financial offenses.
Both the CMT and SOFR indexes are regarded as reliable and secure benchmarks. The CMT has a long history of trustworthiness, while the SOFR is structured to be resistant to manipulation, offering a more stable and transparent basis for financial instruments.
Index Rate as of February 7, 2024. Resource found here: 1 Month Treasury Chart (Last 5 Years)
Choosing Fixed Rate vs. Adjustable Rate Reverse Mortgage Loans
Many seniors we speak to are dead set on a fixed rate reverse mortgage loan. Well, although it sounds like the most financially “stable” and conservative decision, it is worth exploring all options since the adjustable rate has more flexibility in terms of how you receive loan proceeds. When making a decision, remember that changes in your interest rate do not affect your monthly benefit as you are not making monthly payments. Fixed rate reverse mortgage loans require that you take a full draw at closing. With a reverse mortgage loan, you accrue interest on only the money that’s been drawn. If you have a large payoff or wish to take all funds available to you at closing, then a fixed rate reverse mortgage loan may be your best option. On the flip side, if you do not need all the money that’s available to you, a fixed rate reverse mortgage loan may not be your best option. With an adjustable rate reverse mortgage loan, you can set up a line of credit, monthly payments, a lump sum or a combination of any of these. In a line of credit, interest is not accrued until you receive the money.
Reverse Mortgage Interest Rates
FAQ
What is a typical interest rate on a reverse mortgage?
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Updated: February 9, 2024
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HECM Fixed Rate
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Jumbo Fixed (Proprietary)
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Current Rates
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7.56% – 7.93%
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9.375% – 9.99%
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APR
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8.996% – 9.427%*
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9.869% – 10.542%**
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Index
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N/A
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N/A
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Margin
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N/A
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N/A
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Is it better to get a reverse mortgage when interest rates are low?
What is the 60% rule for reverse mortgage?
What is the downside to a reverse mortgage?
What are reverse mortgage rates?
Reverse mortgage rates represent the interest paid on borrowed funds. Higher rates cause the interest to accumulate quickly, increasing the total amount owed, while lower rates reduce the overall cost.
Do reverse mortgages have higher interest rates?
Reverse mortgages can have higher interest rates than traditional mortgage loans or home equity loans. The rate that you pay for a reverse mortgage can vary by lender, and you may have the option to choose a fixed or variable interest rate. Reverse mortgages give homeowners a way to turn their home equity into a stream of supplemental income.
Can you get a reverse mortgage if you have a fixed rate?
You can opt for a fixed rate Reverse Mortgage, where the interest rate never changes as long as you hold the loan. Alternatively, there’s an adjustable rate Reverse Mortgage, where your interest rate can go up or down and are tied to current market rates. HECM programs are available from HUD-approved lenders.
What is the lowest interest rate on a reverse mortgage?
The lowest fixed interest rate on a reverse mortgage is currently 7.560% (8.996% APR). Variable rates are as low as 6.790% with a 1.750 margin. Disclaimer: interest rates are subject to change without notice.