Typical interest rates on a reverse mortgage, specifically for HECM (Home Equity Conversion Mortgage) purchase loans, can vary based on whether the rate is fixed or adjustable. For fixed-rate options, rates have recently been observed in the range of 7.680% to 7.930%, with corresponding APRs (Annual Percentage Rates) from 9.217% to 9.502%. Adjustable-rate options have shown rates from 6.250% to 6.750%, with associated margins ranging from 2.000 to 2.500.
Understanding Reverse Mortgage Interest Rates
Reverse mortgages, primarily HECMs, allow homeowners aged 62 and older to convert a portion of their home equity into cash. The interest rate is a critical factor in determining the total cost of the loan over time. These rates can be either fixed or adjustable.
Fixed-Rate Reverse Mortgages
With a fixed-rate reverse mortgage, the interest rate remains constant for the life of the loan. This provides stability and predictability regarding the amount of interest that accrues. The Annual Percentage Rate (APR) for these loans is generally higher than the stated interest rate because it includes the interest rate plus other loan costs and fees spread out over the loan's term, giving a more comprehensive measure of the total cost.
Here are some typical fixed rates observed for HECM Purchase Reverse Mortgages:
| Interest Rate | Annual Percentage Rate (APR) |
|---|---|
| 7.680% | 9.217% |
| 7.810% | 9.365% |
| 7.930% | 9.502% |
Adjustable-Rate Reverse Mortgages
Adjustable-rate reverse mortgages have interest rates that can change over time, typically tied to a financial index plus a margin. The margin is a fixed percentage added to the index to determine the final interest rate. These rates can fluctuate, meaning the amount of interest accruing on the loan balance can go up or down. While they may start lower than fixed rates, they carry the risk of increasing over the loan term.
Below are typical adjustable rates and their corresponding margins for HECM Purchase Reverse Mortgages:
| Interest Rate | Margin |
|---|---|
| 6.250% | 2.000 |
| 6.500% | 2.250 |
| 6.750% | 2.500 |
For more detailed information on current reverse mortgage rates and their components, you can explore resources like reverse.mortgage/rates. Understanding these rates is crucial for borrowers considering a reverse mortgage, as they impact the amount of equity available and the total loan balance over time.
