Interest Rates
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How your reverse mortgage interest rate is calculated.
Reverse mortgage interest rates are computed using an established index rate as a reference point. Depending on the type of reverse mortgage you are considering, the interest rate may be figured differently. If you have questions about interest rates or how rates are determined by our reverse mortgage calculators, one of our specialists can help you with answers.
Home Equity Converted Mortgage (HECM)
FHA Adjustable
FHA Adjustable interest rates for federally insured reverse mortgages (HECMs) are commonly adjusted on a monthly or yearly basis and are tied to a base index rate, usually the LIBOR index. LIBOR stands for London InterBank Offered Rate, which is the wholesale interest rate London banks use to lend money to one another. This financial index is the standard benchmark for many adjustable rate loan products.
The interest rate is sometimes based upon the One-Year Treasury Constant Maturity Index published by the Federal Reserve Board. The Treasury index indicates the average yield of a range of Treasury securities, all adjusted to the equivalent of a one-year maturity.
With an FHA Adjustable reverse mortgage, interest rates are capped at a pre-determined maximum amount, so even if the interest rate increases, you will never pay more than you expect.
FHA Fixed
Interest rates for FHA Fixed reverse mortgages are locked in at a set rate determined by the lender. With a fixed rate loan, you will always know the exact cost of the interest on your reverse mortgage.
Proprietary Loans
Proprietary loans, reverse mortgages not insured by the federal government, are offered by individual lenders. The interest rates for these loans may be based on the LIBOR or Treasury index, or any other index.
