A little-known fact to most seniors is that the interest rate you can secure on your reverse mortgage loan is the most important factor in determining which banks offer to take.
Forget bank talk and fancy terminology; you want to pay attention to what the bank will charge you in interest to borrow the money (or to borrow the money to pay off any existing home loans or debt).
Our company sole mission is to help seniors compare these loan offers and ultimately find the lowest rate program. We have spent considerable time in creating a network of relationships with major HUD approved lenders who are all willing to give free quotes and compete for your business.
Who can apply for a reverse mortgage?
Be 62 or older. If one spouse is under 62, you may also apply.
Have sufficient equity available. Home equity is simply the difference between what the home is worth and subtracting any existing mortgages. The difference is the equity available. The more equity you have, the better off you are.
Must be your primary residence. Investment homes and or second homes do not qualify.
Don’t make the same mistake most seniors make. Get educated on how the program works and how you can secure the lowest rate HECM reverse mortgage. If you prefer that we compare and analyze this information for you, no problem, we can shop around and put the best offer on your table from one of our licensed partners. You should receive anywhere between 2-3 different quotes, and we typically compare upwards of 3-5 lenders before letting you know or putting you in contact with the lender who has the lowest/best rates for your program.
What are today’s current reverse mortgage interest rates?
Below we show you current reverse mortgage rates both the Fixed-rate and adjustable-rate HECM programs. Please note that this is only a reference and not a loan offer.
| Fixed-Rate | Adjustable | |
|
Note Rate
|
4.00% |
2.154%
|
| Monthly Insurance Rate | 1.25% | 1.25% |
| APR (Inc. insurance & closing costs) | 5.72% | **see below |
|
Index
|
N/A
|
0.15
|
| Margin | N/A | 2.00 |
|
Monthly Servicing Fee
|
$0
|
$0
|
|
Lending Limit
|
$625,500
|
$625,500
|
|
Payment Plans
|
||
| Lump Sum | Yes | Yes |
| Line of Credit | No | Yes |
| Monthly Payments for Life | No | Yes |
| Combination | No | Yes |
How are the interest rates calculated for my loan? LIBOR, which stands for London Interbank Offered Rate, is the index of which all banks peg their reverse loans off of. There is a markup above the LIBOR so the bank can make money; different banks will charge different rates. LIBOR rates are lower than the old indexed used CMT (constant maturity of U.S. treasuries). That is great news for seniors.
How can I secure the lowest reverse mortgage rate? Easy, comparison shop. As mentioned above this is what our company does, and we have invested significantly in making sure we can beat whatever deals you can obtain on your own.
Are reverse mortgage interest rates higher than traditional mortgages? Yes, HECM rates are higher than most typical mortgages such as an HELOC, home equity loan, or a cash-out refinance. The main difference being that none of those programs allow you NOT to have a monthly mortgage payment to make. So, if you are looking at reducing payments or borrowing money without a payment, there is NO point in comparing those other programs as they are not related.
What is mortgage insurance premium and how does that work?
Every borrower who takes out a reverse mortgage will be responsible for paying an initial Mortgage Insurance Premium (MIP), as well as an annual MIP of 1.25 percent. For more information on other fees required visit our fees/costs of the HECM loan.
What factors make up the calculations to determine my reverse mortgage loan?
Great questions. There are many factors which influence how much you are able to borrow and at what costs (through fees and interest rates). Some of these factors are:
- Age of the youngest borrower. Older the borrower the more equity is available.
- Lending limits set by FHA/HUD and the lender if its a private program
- A value of your home determines by the appraisal (and not Zillow.com or any other website).
- PFL – principal factor limits
- The interest rate on the HECM loan.
- If you have any existing mortgages or debt to payoff.
Use our free reverse mortgage calculator.
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http://portal.hud.gov/hudportal/documents/huddoc?id=fharates_current.pdf
Reverse mortgage terminology related to interest rates
When researching and applying for a reverse mortgage, you will likely hear or read several industry and contract terms. Many of these terms deal with the various interest rates that apply to a reverse mortgage. Below are some of the more common terms related to reverse mortgage interest rates.
Actual Interest Rate
The actual interest rate is what you pay when the loan becomes due. It will be based on actual interest rate movements during the loan.
Credit line growth rate
This is the rate that the unused portion of an HECM line of credit grows. Once the initial line of credit is determined — based on the value of the home and the age of the borrower — it grows automatically at a similar variable rate. The growth rate is equal to the lender’s margin, plus the 1.25 percent mortgage insurance premium assessed on the loan plus subsequent values of one-month LIBOR rates.
So if the lender’s margin was 2 percent and the LIBOR index value was 1.5 percent, the lender would add the 1.25 percent MIP to create a credit line growth rate of 4.75 percent (2% + 1.5% + 1.25%).
Expected Interest Rate
As its name implies, the expected interest rate is what the lender anticipates the loan rate averaging over the life of the reverse mortgage. It’s one of three factors, in addition to your age and the value of the home, that helps determine how much of your home’s equity you can borrow.
The lender will arrive at that rate based on the average yield for U.S. Treasury securities adjusted to a constant maturity of 10 years, or the 10-year rate on the London Interbank Offered Rate (LIBOR) Index. The expected rate is just a projection. The actual interest you pay when the loan becomes due will be based on actual interest rate movements during the loan.
Fixed interest rate
When a fixed interest rate is applied to a reverse mortgage, it means the rate will remain unchanged for the life of the loan, regardless of any movements in market rates or external indexes.
The main downside to a fixed interest rate is that reverse mortgage borrowers can only receive the proceeds in a lump sum. No other payment options are available with a fixed rate loan.
Als, reverse mortgage rules sate that borrowers can only claim 60 percent of the loan’s principal amount in the first year, unless they are using it to pay off the existing mortgage balance.
Lenders margin
The lenders margin is an amount added to market interest rates to determine the total variable loan rate for a given period. When establishing the interest rate of a variable rate loan, reverse mortgage lenders use an index, such as the London Interbank Offered Rate (LIBOR) Index or the U.S. Treasury Index. Lenders will then set a margin above the index percentage to determine the total variable loan rate. Once the lenders margin is set, it cannot change for the life of the loan.
For example, a lender may set its margin at 2 percent. If the LIBOR Index is 2.5 percent, the variable loan rate charged during that period will be 4.5 percent (2 + 2.5). If the LIBOR Index rises to 5 percent, the reverse mortgage interest rate will also rise, to 7 percent.
LIBOR
This is an acronym for the London Interbank Offered Rate, which reflects the rate at which banks borrow money from other banks. The LIBOR index is used on many variable rate reverse mortgages to help determine the rate assessed on the loan during a certain period.
The actual interest you pay when the loan becomes due will be based on actual interest rate movements during the loan.
Variable (or adjustable) interest rate
When a variable interest rate is applied to a reverse mortgage, it means the rate will fluctuate over the life of the loan. Each month or year, the interest rate will be recalculated based on external factors and the new rate will be applied to funds that you borrowed or accessed during that period.
For example, the interest rate on the first year of your loan may be 4.5 percent. The money you access during that first year will be charged 4.5 percent interest. The next year, the rate might increase to 5 percent and the funds you receive from the reverse mortgage during that second year will be charged 5 percent interest.
HECMs typically use the London Interbank Offered Rate (LIBOR) Index to determine variable loan rates. The U.S. Treasury Index is also commonly used. Reverse mortgage lenders will then set a margin above the index percentage to determine the variable loan rate. Once the margin is set, it cannot change for the life of the loan.
The good news for seniors looking into a Home Equity Conversion Mortgage in 2018 is that interest rates on these loans are still very low as of July 2018.
Rates have been fluctuating wildly over the last few months; seniors who are serious about getting the lowest reverse mortgage rates should take action asap. Not to mention financial assessment will make getting the lowest rate even harder now is the time to take action.
HECM Reverse Mortgage Rates for 2018.
I have an existing mortgage balance…
You can very well reduce the amount of interest you will pay on your mortgage by getting a reverse mortgage at a lower interest rate. This is a no-brainer move if you are going to stay in your home for a minimum of five years. Most likely the reverse rate is going to be much lower than your existing loan making this a good move. If there is more value left after paying off your current mortgage (there won’t be a mortgage payment with a reverse), you may potentially have access to those funds.
I own my home free and clear…
If you do not have a mortgage but are looking for cash in your retirement with extremely low rates, you can borrow for cheap through the HECM program. For most, the home value will appreciate enough to cover any interest costs as the loan increases over time and thus protecting the equity that has not been touched. Many seniors are now considering taking a reverse mortgage to boost their retirement income, pay off any debts, or to be able to live in the home until they are ready to pass away. If home values increase as expected, this will essentially mean you can borrow at even lower rate when you factor in this offsetting to the rate charged on the reverse.
The interest rate you receive on your reverse mortgage loan will be to most important factor to determine how much you will be able to borrow. Also how much interest will accrue and be due when the borrowers pass and or sell the home.
Just as with a forward mortgage (think of a refinance) where you would want to secure a low fixed rate this is the same concept with the reverse mortgage. The higher the interest rate, the less money you can take out with a reverse mortgage. Choosing the wrong interest rate or program can be detrimental to an average seniors retirement, hence our focus in helping making those decisions of which loan to pick (and which rate to take). Reverse mortgages are not easy to understand, and the loan applications are very long, give us a try to help you figure out how to get the best rate.
The HECM lenders will be giving you a portion of the home’s equity upfront at a pre-determined and agreed rate (and under the program payout you choose as well). This varies wildly from bank to bank; this is where we started from with the concept of comparison shopping top HECM reverse mortgage banks to secure you the lowest interest rate possible.
Current HECM Reverse Mortgage Rates 2018
HECM fixed reverse mortgage: lowest rates 5%
servicing fee: $0 ( some lenders charge $15-30 month which adds to thousands over loan life)
FHA lending limit: $625,000 for 2017 ( Federal Housing Administration )
Total Interest Rate charged (APR) to a reverse mortgage is the Margin + Index + Monthly Mortgage Insurance of 1.250%.
The HECM rates will allow you to compare loans with other lenders, it will ultimately determine your borrowing costs, how much money you will receive (upfront or for lifetime income), and whether it is a good time even to consider getting a reverse mortgage. As of february, 2017 rates are still at all time low’s so it is still recommended that seniors consider the reverse mortgage loan option now as locking in a low rate will save you or allow you to keep more equity.
Besides the interest rate, you should consider the origination fees involved with your loan as some lenders will not charge you an origination fee. There are no free lunches and even lenders who don’t charge an origination fee will find ways to charge for their service – typically by charging a higher rate.
*** Trying to perfectly to time the interest rates market can backfire – we can advise that when rates are as low as they are they usually, or they can only increase from here – a .25% interest rate difference can lead to substantial savings long term. This is becoming a reality as interest rates are increasing and are no longer at an all time low. As the recession ends, there is a high chance that mortgage rates for all programs start to increase. ***