What Rates Are Available?
.........................................................................................................
As with a conventional home loan or refinancing loan, there are different interest rate options available. Reverse mortgages can come with either a fixed rate, which means that the interest rate stays the same for the entire lifetime of the loan, or an adjustable interest rate. With an adjustable rate reverse mortgage, the interest rate may change on either a monthly or a yearly basis. That is one of the details that you will work out with your lender once you begin to research your options.

It is important to remember that in addition to having an interest rate just like a more conventional home loan, there will be fees and closing costs associated with your reverse mortgage. Of course, with a reverse mortgage, these costs are usually simply financed into your loan and are therefore not actually paid during your lifetime. That can be seen as a definite bonus.

If you do decide on a reverse mortgage with a variable rate that means that there will be a financial index which the interest rate is tied to on which your interest rate changes will be based. If you go with an FHA Reverse Mortgage, the interest rate is based on the one year U.S. Treasury Note. This generally gives an FHA Reverse Mortgage a lower interest rate than that of a conventional mortgage that is tied to the prime rate.

Home Equity Conversion Mortgage loans are the FHA reverse mortgage loans that also tend to offer the largest loan advances of any of the reverse mortgage options. An HECM gives you more choices when it comes to how you want to have your loan disbursed as well. Overall, you may find that an HECM is actually less expensive than many private companies’ reverse mortgages. While there are reverse mortgages that have smaller fees, they will generally also have higher interest rates than an HECM loan. The interest rates on an HECM reverse mortgage are determined by the variable Certificate of Deposit rate plus a margin. This rate is adjusted monthly.

Another reverse mortgage option that may cost less is one offered by your state or local government. Keep in mind that this type of reverse mortgage loan can usually only be used a specific purpose, such as to repair your home or pay your homeowners insurance or property taxes. These loans may also only be available to homeowners who meet certain criteria for low incomes.

If you are looking at a Home Keeper reverse mortgage, the interest rate charged will adjust monthly and equal a set spread above a specific index rate . The index is based on the weekly average of one-month secondary market CD rates. This is an index published and available from the Federal Reserve. This rate can never rise more than 12 percentage points above your initial interest rate, but there is no actual cap on the monthly adjustment beyond that lifetime cap.

When you are comparing your reverse mortgage loan options, it’s a good idea to compare the current and future interest rates as well. Your lender or reverse mortgage counselor can give you the most up to date information on interest rates.

Learn more about Reverse Mortgages >>