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Current Reverse Mortgage Rates

(Updated 12/08/2014)

Fixed-Rate  Adjustable 
Note Rate

3.99% (NEW)

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 n/a Yes
Monthly Payments for Life n/a Yes
Combination n/a Yes

 

Total Interest Rate charged to a reverse mortgage is the Margin + Index + Monthly Mortgage Insurance of 1.250%

Example 3.99% Fixed: 3.99% + 1.25% Monthly MIP = 5.24%
Example Libor: 2.00 Margin + Index of .15 + 1.25% Monthly MIP = 3.40%

* Fixed Rate APR ran with $250,000 loan amount including 1.250% Mortgage Insurance Premium and standard 3rd party closing costs.

** Tenure or Line of Credit Plan: Assume the youngest borrower was 72 years old when you opened your Plan and you had an outstanding balance of $10,000 at the beginning of the Draw Period with an initial rate of 8.37%. If you took no other advances or payments and the rate increased as rapidly as possible so that the rate was 10.37% in the second year, 12.37% in the third year and 13.37% (5.0% above an assumed initial rate of 8.37%. (The maximum Annual Percentage Rate) in the fourth year and remained at the maximum rate, the minimum payment that would be due at the end of 13 years (based on the life expectancy of the youngest borrower) would be $51,517.55.

Why interest rates are important when choosing the best reverse mortgage

1. The lower the expected interest rate, the maximum amount of proceeds are made available to the homeowner. (Principle Lending Limit)

2. Over time lower rates can add up to $10's of thousands saved in interest charges

Also See: How Rising Reverse Mortgage Rates Lower Principle Limit Factors

 

Choosing Fixed-Rate vs Adjustable

You can choose a fixed rate or an adjustable rate and fixed rates sound great, but they are what is called a “closed end instrument” and require the borrower to take the entire loan at the very beginning of the transaction. For borrowers who are paying off an existing mortgage and need all their funds to pay off the current loan, this is no problem. 

For a borrower who has no current lien on their property or a very small one, this would mean that they would be forced to take the entire eligible mortgage amount on the day the loan funds. This might give a borrower $200,000, $300,000 or more in cash from the very first day that they do not need at the time and on which they are accruing interest. This can also have an adverse affect on some seniors with needs-based programs. (Medicaid: Seniors on Medicaid and some other needs-based programs would impact their eligibility by having the sudden addition of the liquid assets)

A borrower who is planning on using only a portion of their funds monthly need not pay interest on the entire amount from the very start, eroding the equity unnecessarily fast.  An adjustable rate will accrue interest at a much lower rate at today’s rates, but has a 10% cap and can go much higher if rates rise in the future.

However, the adjustable rate programs do allow you more flexibility in how you can receive your funds.  First option would be a cash lump sum.  This is not advised on the adjustable product as a cash lump sum request is usually associated with fixed interest rates, however it is available.  Second option would be a line of credit.  The Reverse Mortgage line of credit is not the same as a "Home equity Lines of Credit or (HELOC) that you can get at your local bank.  The Reverse Mortgage line of credit grows in available on the unused portion and cannot be frozen or lowered arbitrarily as the banks can and have done recently on the HELOC's.  Third option is a monthly payment option which can be set over a specific period of time and then cease or as a "tenure" which would be a monthly payment guaranteed for life.  Fourthly, a homeowner could choose any combination of the three options listed previously.

The adjustable rates are currently much more flexible to meet borrowers’ needs. One of the things that can determine the amount for which borrowers will ultimately qualify is the rate at which the loan accrues interest.  When the margins on the adjustable rates were lower and the fixed rate was higher, the adjustable rates gave borrowers more money in their pockets in the form of eligibility. Now, most borrowers we run through the HECM calculator receives more money on the fixed rate program.

This is extremely important to know if you are trying to get as much as possible to pay off an existing lien. It also means that the higher the margin, the less money the borrower will receive and the faster interest on the loan will accrue. So the thing to look for in a reverse mortgage here is definitely the rate on a fixed rate or the margin on an adjustable rate that is being quoted. 

Also See:

 

About Libor Index

LIBOR stands for "London Inter-Bank Offered Rate."  It is based on rates that contributor banks in London offer each other for inter-bank deposits.  In October of 2007, the U.S. Federal Housing Administration (FHA) ruled in favor of insuring ARM loans based on the one-year LIBOR index. At the same time, HUD also ruled to allow the one-month LIBOR to be used for the purpose of calculating adjustments to interest rates for monthly adjusting Home Equity Conversion Mortgage (HECM). Below is a chart of LIBOR rates for the last 10 years.

LIBOR loans normally have lower margin rates than CMT (constant maturity of U.S. treasuries).  This is particularly helpful to senior borrowers due to the fact that the CMT margin became increasingly less desirable when selling the loans in the secondary markets and the change helped insure the availability of the market for ongoing lending.  

1 month libor history chart

Note: That same reverse mortgage in 2001 with an open line of credit would have grown in availability by that same rate of 8.625% - Example: $200k Line of credit would grow in availability by $1,437, which then compounds month after month, year after year. Still think reverse mortgages are expensive loans? Be sure to read more about the line of credit growth feature


Adjustable vs Fixed History

Below you will find the history of the Libor and National Fixed Rate Averages since 1990. We have prepared this illustration to better help your decision when choosing your interest rate option. Be aware these are only the indexes themselves and do not include the lenders margin + 1.250% Monthly Insurance Rate.

1-Month LIBOR vs Average Fixed Rates
 
Time Period: January, 2004 - December, 2014
Date 1-Month
LIBOR
1-Year
LIBOR
Avg 30Yr
Mtg Rate
Jan 2004 1.0982 1.4607 5.63
Feb 2004 1.0973 1.3645 5.69
Mar 2004 1.0914 1.3401 5.43
Apr 2004 1.1007 1.8082 5.37
May 2004 1.1089 2.0764 5.73
Jun 2004 1.3582 2.4682 5.96
Jul 2004 1.4929 2.4632 5.88
Aug 2004 1.6482 2.3001 5.77
Sep 2004 1.8401 2.4445 5.63
Oct 2004 1.9870 2.5289 5.64
Nov 2004 2.2826 2.9607 5.65
Dec 2004 2.4178 3.1004 5.71
Jan 2005 2.5892 3.2710 5.72
Feb 2005 2.6895 3.5114 5.68
Mar 2005 2.8582 3.8420 5.76
Apr 2005 3.0826 3.7101 5.86
May 2005 3.1126 3.7789 5.80
Jun 2005 3.3401 3.8632 5.65
Jul 2005 3.5107 4.1745 5.68
Aug 2005 3.6942 4.3123 5.83
Sep 2005 3.8584 4.4067 5.85
Oct 2005 4.0882 4.6765 5.98
Nov 2005 4.2954 4.7379 6.22
Dec 2005 4.3857 4.8226 6.29
Jan 2006 4.5720 4.9412 6.30
Feb 2006 4.6310 5.1526 6.31
Mar 2006 4.8260 5.2476 6.43
Apr 2006 5.0245 5.4217 6.50
May 2006 5.1071 5.4139 6.61
Jun 2006 5.3451 5.7660 6.65
Jul 2006 5.4045 5.5910 6.77
Aug 2006 5.3314 5.4501 6.75
Sep 2006 5.3229 5.2985 6.59
Oct 2006 5.3198 5.3348 6.54
Nov 2006 5.3479 5.2439 6.45
Dec 2006 5.3279 5.3139 6.40
Jan 2007 5.3201 5.4414 6.37
Feb 2007 5.3214 5.3328 6.40
Mar 2007 5.3195 5.2009 6.33
Apr 2007 5.3201 5.2967 6.28
May 2007 5.3210 5.3885 6.37
Jun 2007 5.3195 5.4048 6.58
Jul 2007 5.3200 5.3914 6.74
Aug 2007 5.4801 5.1847 6.73
Sep 2007 5.5121 5.0703 6.59
Oct 2007 4.9940 4.8841 6.50
Nov 2007 4.7412 4.5328 6.35
Dec 2007 5.0409 4.4305 6.23
Jan 2008 3.9772 3.5091 5.97
Feb 2008 3.1393 2.8140 5.87
Mar 2008 2.8069 2.5124 6.03
Apr 2008 2.7809 2.8019 5.97
May 2008 2.5315 3.0270 6.04
Jun 2008 2.4702 3.4106 6.23
Jul 2008 2.4601 3.2852 6.41
Aug 2008 2.4672 3.2374 6.46
Sep 2008 2.8615 3.3365 6.17
Oct 2008 3.8681 3.8236 6.16
Nov 2008 1.6550 2.8435 6.18
Dec 2008 1.1214 2.4058 5.51
Jan 2009 0.3842 1.9038 5.12
Feb 2009 0.4589 2.0571 5.04
Mar 2009 0.5323 2.1240 5.06
Apr 2009 0.4541 1.9409 4.88
May 2009 0.3503 1.7007 4.88
Jun 2009 0.3165 1.6773 5.09
Jul 2009 0.2914 1.5014 5.26
Aug 2009 0.2708 1.4266 5.25
Sep 2009 0.2476 1.2709 5.16
Oct 2009 0.2444 1.2339 5.02
Nov 2009 0.2385 1.0980 5.01
Dec 2009 0.2330 0.9999 4.92
Jan 2010 0.2316 0.9059 5.01
Feb 2010 0.2289 0.8518 5.05
Mar 2010 0.2364 0.8698 4.99
Apr 2010 0.2573 0.9514 5.02
May 2010 0.3291 1.1148 4.99
Jun 2010 0.3489 1.1894 4.91
Jul 2010 0.3361 1.1240 4.78
Aug 2010 0.2769 0.9485 4.65
Sep 2010 0.2571 0.8073 4.55
Oct 2010 0.2562 0.7688 4.49
Nov 2010 0.2539 0.7640 4.42
Dec 2010 0.2618 0.7842 4.58
Jan 2011 0.2606 0.7817 4.71
Feb 2011 0.2629 0.7928 4.79
Mar 2011 0.2540 0.7800 4.84
Apr 2011 0.2216 0.7699 4.80
May 2011 0.1993 0.7417 4.74
Jun 2011 0.1874 0.7267 4.62
Jul 2011 0.1864 0.7445 4.57
Aug 2011 0.2103 0.7774 4.56
Sep 2011 0.2304 0.8315 4.38
Oct 2011 0.2435 0.9059 4.19
Nov 2011 0.2526 0.9934 4.22
Dec 2011 0.2830 1.0987 4.15
Jan 2012 0.2843 1.1162 4.25
Feb 2012 0.2513 1.0732 4.08
Mar 2012 0.2420 1.0540 3.90
Apr 2012 0.2401 1.0489 3.93
May 2012 0.2389 1.0596 3.78
Jun 2012 0.2425 1.0694 3.67
Jul 2012 0.2466 1.0661 3.66
Aug 2012 0.2384 1.0433 3.56
Sep 2012 0.2217 1.0013 3.56
Oct 2012 0.2134 0.9235 3.44
Nov 2012 0.2088 0.8639 3.36
Dec 2012 0.2112 0.8489 3.29
Jan 2013 0.2054 0.8175 3.35
Feb 2013 0.2011 0.7635 3.43
Mar 2013 0.2035 0.7359 3.54
Apr 2013 0.1995 0.7168 3.56
May 2013 0.1967 0.6936 3.40
Jun 2013 0.1932 0.6839 3.55
Jul 2013 0.1911 0.6839 4.01
Aug 2013 0.1841 0.6680 4.26
Sep 2013 0.1806 0.6527 4.38
Oct 2013 0.1724 0.6178 4.32
Nov 2013 0.1673 0.5867 4.21
Dec 2013 0.1672 0.5791 4.25
Jan 2014 0.1597 0.5753 4.37
Feb 2014 0.1551 0.5546 4.30
Mar 2014 0.1549 0.5571 4.22
Apr 2014 0.1517 0.5500 4.24
May 2014 0.1504 0.5380 4.18
Jun 2014 0.1522 0.5420 4.08
Jul 2014 0.1544 0.5558 4.09
Aug 2014 0.1560 0.5589 4.08
Sep 2014 0.1540 0.5777 4.06
Oct 2014 0.1536 0.5524 4.11
Dec 2014 0.1548 0.5621 -

Additional posts on interest rates in our blog: by Category "Interest Rates"