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.
California Reverse Mortgage Rates - Complete Guide
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 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 interest payments on your loan are deferred to the end of the life of the loan. What this means for you: 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
- The borrower fails to pay ongoing property taxes and homeowner's insurance and doesn't comply with all the loan terms.
Factors Affecting Reverse Mortgage Interest 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.
Does the Reverse Mortgage Interest Rate Impact How Much Money You Get?
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 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.
John Correll, CRMP
Certified Reverse Mortgage Professional
(619) 294-9820 | (888) 603-1550