What is the Interest Rate on a Reverse Mortgage

Reverse Mortgages are different from forward mortgages (How are they different?) and so are the rates. Reverse mortgage interest rates are always changing. Contact us for an updated rate sheet. There are a few options you have when choosing which interest rate is right for you. That being said, what is the interest rate on a reverse mortgage? There is a variable rate and a fixed rate. What are the differences in the two?

What is a Fixed Interest Rate for a Reverse Mortgage

A fixed rate is one option the borrower has when choosing their interest rate. Fixed rate products offer a variety of rates depending on where the market is at. It is important to know that the lower you make your rate, the higher the closing costs are going to be (Reminder: closing costs are financed into the loan). A fixed rate does exactly what it says, it gives one flat interest rate for the life of the loan that will never change.

*Certain products do not allow fixed rates. That being said, that will need to be considered*

What is a Variable Interest Rate for a Reverse Mortgage

A variable interest rate is the other option for a borrower. The two parts of a variable interest rate are: the index (which is the variable part), and the margin (the fixed part).

The rate is the current index plus the margin. This is a value that changes every week. In a conventional monthly variable, your rate will change to whatever the index + the borrower’s margin is each month. That being said, the rate will be capped at 5% higher than when it started. Thanks to this, the borrower won’t ever have to worry about their rate getting above that.

The margin is the number that you get to choose. These also change based on the market, but generally range from 1.625-3. This number stays fixed throughout the duration of the loan.

Will the Bank Own My Home?

A very common question people have about reverse mortgages is will the bank own my home. The answer is no. There is a lien on your home, just like a forward mortgage, but it is yours until you decide to leave. HECM reverse mortgages have insurance so that you will never have to pay off this extra debt even if your loan outgrows the value of your home.

Watch this short video and contact us to learn more

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