What Are Reverse Mortgage Interest Rates?
Reverse Mortgage Interest Rates are an important component in determining both the accrual rate at which the reverse mortgage loan gets bigger over time - but it also determines the amount of money you qualify for with a reverse mortgage.
As a CRMP - Certified Reverse Mortgage Professional, one of the most common questions I hear all the time from clients is "What Are The Interest Rates on Reverse Mortgages?"
My goal on this page is to give you a better understanding on how reverse mortgage rates impact your loan and what you should know when considering a reverse mortgage and a loan officer to guide you in this important decision.
Exploring the Impact of Interest Rates on a California Reverse Mortgage
California Reverse Mortgage Interest Rates - Complete Guide
A Deep Dive into the Role of Interest Rates in California and their Impact on Reverse Mortgages
Reverse Mortgage Rates depends on a lot of factors - including the type of reverse mortgage selected as there are multiple types of reverse mortgages to choose from. The loan structure of how you wish to receive your money also impacts rates. Lastly the current rates today do vary over time with market conditions mostly set by the overall state of the economy.
My goal here is to help you better understand how interest rates impact reverse mortgages and what you should know to get the best deal for yourself. The interest rate absolutely does impact lending percentages and the amount of money you get with a reverse mortgage. (read the last section on this page)
When selecting your loan officer it is advisable to find someone knowledgeable and experienced with reverse mortgages who can guide you and get the best deal for yourself. I have over 25 years lending experience and only originate reverse mortgages - so if you are looking for a true specialist - I would love to earn your business.
- John Correll, CRMP Certified Reverse Mortgage Professional
How Do Reverse Mortgage Interest Rates Work?
Reverse mortgage interest rates work similar to other loans and credit lines. The finance charges accrue based on your outstanding loan balance and are calculated daily. The calculated charges are then added to your loan balance on a monthly basis. You can find the details of these charges on your monthly statement which loan servicing will mail to you while you have the reverse mortgage.
What sets reverse mortgages apart is that the repayment on a reverse mortgage is deferred to the end of the life of the loan. What this means for you if you have a reverse mortgage: You don't need to make make monthly mortgage payments.* While most mortgages require you to make minimum payments each month to repay the loan balance and accrued interest over time - reverse mortgages defer all the loan and interest repayment until there is a maturity event. The loan and all accrued finance charges are paid back in one payment at the end of the loan (upon a maturity event) If you do choose to make periodic payments you can - but most people enjoy the benefits of a reverse which doesn't requirement a monthly payment. A maturity event occurs when one of the follow happens:
- The home is sold
- The last borrower permanently moves out of the home or passes away or fails to maintain as their primary residence
- The borrower fails to pay ongoing property taxes and homeowner's insurance or doesn't comply with all the loan terms.
* Important to note: While a reverse mortgage does not have a required monthly mortgage payment, the borrower is required to do several things including: at least one borrower must continue to occupy the home as their primary residence and pay ongoing property taxes, homeowners insurance bills, HOA dues (if applicable) and home maintenance costs. If all loan terms are met the borrower is able to enjoy the freedom and benefits of NO MONTHLY MORTGAGE PAYMENTS!
Factors Affecting Reverse Mortgage Rates
There are several factors that influence the interest rates offered for reverse mortgages - including:
- Market Conditions: Interest rates may vary based on the overall state of the economy, financial markets and macro conditions.
- Loan Type: There are several types of different reverse mortgage products available and each have varying interest rate structures. Federal Housing Administration (FHA) insured Home Equity Conversion Mortgages (HECMs) generally tend to have lower rates than proprietary or jumbo reverse mortgages.
- Loan Structure: The way you receive your loan proceeds can influence the interest rate or even product selection. Whether you choose a lump sum, line of credit, or monthly installments may affect the rate.
Types of Reverse Mortgage Interest Rate Options: Fixed vs. Adjustable
There are two primary interest rate options for reverse mortgages:
- Fixed Interest Rate: With a fixed rate, the interest remains constant throughout the loan term and cannot change after closing. Generally speaking most fixed rate reverse mortgages require borrower to take a lump sum at closing on their money.
- Adjustable Interest Rate: An adjustable rate can change over time based on predetermined factors such as index and margin. Generally speaking most adjustable rate reverse mortgages allow for a combination of lump sum, line-of-credit feature or ability to draw funds over time.
Interest Rates on a HECM Reverse Mortgage vs Jumbo Reverse Mortgage in California
Both the HECM Reverse Mortgage and the Jumbo Reverse Mortgage have their advantages and drawbacks:
HECM Reverse Mortgage
- Interest rates tend to be lower than a Jumbo Reverse Mortgage
- Closing costs can run higher than a Jumbo Reverse Mortgage
- Loan amounts are limited based on HUD's lending limit
Jumbo or "Proprietary" Reverse Mortgage
- Interest rates tend to be higher than a HECM Reverse Mortgage
- Closing costs can run lower than a HECM Reverse Mortgage as there is no MIP (mortgage insurance premium) charges
- Loan amounts are offered up to $4 million with exceptions as high as $6 million
How Does Growth on a HECM Reverse Mortgage Line-of-Credit Work?
A reverse mortgage line of credit offers a flexible means of accessing funds from a reverse mortgage as needed. The line of credit's size is determined at the time of closing and offers a percentage of the homeowner's accrued home equity. Funds that are not drawn at closing by the borrower can then be placed into the reverse mortgage line-of-credit for future draws - this works similar to a traditional home equity line of credit but with the benefits of a reverse mortgage.
HECM Line-of-Credit Growth Feature:
The HECM reverse mortgage has a very unique feature: growth on available line-of-credit over time. HECM stands for Home Equity Conversion Mortgage. One of its most attractive features is its growth capability. HOW IT WORKS: The untapped portion of the line of credit will get bigger over time. It grows at the current interest rate plus MIP rate (mortgage insurance premium). As the line-of-credit expands over time, this increases the borrower's borrowing potential and granting access to additional funds as it grows. It's important to note that this growth exclusively applies to the available, undrawn portion of the line of credit and does not affect funds already withdrawn. So there is an advantage to keeping funds in the line-of-credit instead of drawing them out early.
Is Is Possible to Refinance a Reverse Mortgage in California if Interest Rates Go Down?
Yes, assuming the borrower qualifies, market conditions allow for it and there is a tangible benefit to the borrower. Many people with reverse mortgage do in fact refinance for more money or better terms as the home appreciates over time, when lending percentages are adjusted or interest rates are lowered. The market is very cyclical and there could potentially be a time in the future where refinancing your reverse mortgage makes sense.
If you have a reverse mortgage now - please give us a call and we can review it for the potential of a reverse-to-reverse refinance. (888) 603-1550.
Does the Reverse Mortgage Interest Rate Impact How Much Money You Get in California?
YES! Absolutely!
This is probably one of the most important concepts to understand and why you need an advocate on your side who can help you get the best reverse mortgage for yourself.
There Is An Inverse Relationship Between the Interest Rate on a Reverse Mortgage and the Lending Percentage of What You Qualify For
So What does that mean? In short:
Higher Interest Rate = Lower Lending Percentage (smaller reverse mortgage)
Lower Interest Rate = Higher Lending Percentage (bigger reverse mortgage)
This is a topic many in the reverse mortgage industry do not discuss with their borrowers but it is important to understand and why it pays to shop around for the best deal for yourself.
Even if you have already gotten a proposal from another lender or broker - I encourage you to reach out to me and get a 2nd quote - Often times I am able to get my clients more attractive terms on some of the fees or interest rates - I would love to hear from you.
I have always been an advocate for my clients and am here to educate them and empower them to make the best decisions for themselves. I'm also committed to fair, ethical pricing which sadly is often missing in this industry. As the owner and broker for Accurate Reverse Mortgage Corp. I have the ability to go to bat for my clients and would love to have a conversation with you.
Request Your Personalized Reverse Mortgage Quote today - including a side-by-side comparison of Interest Rates, Lending Percentages and Fees.
I look forward to hearing for you and hope you found this information valuable.
Sincerely,
John Correll, CRMP
Certified Reverse Mortgage Professional
(619) 294-9820 | (888) 603-1550
California Reverse Mortgage Rates
California Reverse Mortgage Interest Rates
Choosing the Right Reverse Mortgage Lender or Broker in California
This article reviews some of the key factors in selecting a reverse mortgage lender or broker in California. This guide simplifies the process, explaining what to consider when choosing a company to work with on a reverse mortgage from the loan officer, lender vs broker and what to look out for and avoid. Written from the prospective of a CRMP which stands for Certified Reverse Mortgage Professional.
Inflation in California and the Role of Reverse Mortgages
This article will explore ways a Reverse Mortgage in California may help combat the rising costs associated with inflation. Presented by John Correll, CRMP certified reverse mortgage professional in California.
Getting a Reverse Mortgage in California? Things to Consider
presented by John Correll, CRMP – Certified Reverse Mortgage Professional in California Are You Considering a Reverse Mortgage in California? Essential Things to Keep in Mind For many older residents in California, considering a reverse mortgage can be a smart financial move. With the state’s high living costs, funding retirement can be tough. A…
Using a Reverse Mortgage Line of Credit for In-Home Care in California: A Simple Guide and Strategy
Using a Reverse Mortgage Line of Credit to Cover Homecare or Long-Term Care Expenses in San Diego and California Introduction As we age, planning for in-home care becomes more important, especially in a state like California where everything is expensive. A strategy that has worked well for many older homeowners is a reverse mortgage line of credit.…
