Current Reverse Mortgage Rates for November 2020. *Rates subject to change without notice.
HECM Refinance Rates
Fixed Rate Adjustable Rate Lending Limit
3.06% (4.06% APR) 2.12% (2.00 Margin) $765,600
3.18% (4.18% APR) 2.37% (2.25 Margin) $765,600
3.31% (4.31% APR) 2.62% (2.50 Margin) $765,600
3.56% (4.56% APR) 2.87% (2.75 Margin) $765,600
3.68% (4.68% APR) 3.12% (3.00 Margin) $765,600
Adjustable Rate Payment Options: Lump Sum, Line of Credit, Term, Tenure, Combination.
APR Illustration: 3.06% + .50% Monthly MIP = 3.56% in total interest charges. Assumes $250,000 loan amount and includes .50% Mortgage Insurance, standard 3rd party closing costs.
HECM Purchase Rates
Fixed Rate Adjustable Rate Lending Limit
3.18% (4.18% APR) 2.12% (2.00 Margin) $765,600
3.31% (4.31% APR) 2.37% (2.25 Margin) $765,600
3.56% (4.56% APR) 2.62% (2.50 Margin) $765,600
3.68% (4.68% APR) 2.87% (2.75 Margin) $765,600
3.75% (4.75% APR) 3.12% (3.00 Margin) $765,600
APR Illustration: 3.18% + .50% Monthly MIP = 3.68% in total interest charges. Assumes $250,000 sales price and includes .50% Mortgage Insurance, standard 3rd party closing costs.
Adjustable Rate Payment Options: HECM for Purchase Transactions (H4P), Line of Credit, Term, Tenure, Combination.
Index: 12-Mo. CMT
Lifetime Cap: 5% Over Start Rate
Jumbo & Proprietary Rates
Fixed Rate Adjustable Rate Lending Limit
4.95% (5.95% APR) 5.50% (4.99 Margin) $3,000,000
6.075% (6.075% APR) 5.50% (5.124 Margin) $3,000,000
6.50% (6.625% APR) 5.50% (5.125 Margin) $3,000,000
6.99% (6.99% APR) 5.50% (5.240 Margin) $3,000,000
Jumbo APR Illustration: Assumes $1,000,000 loan amount, includes standard 3rd party closing costs.
Adjustable Rate Payment Options: Lump Sum or Line of Credit
Index: 3-Mo. Libor
Lifetime Cap: 5% Over Start Rate
Tip #1: If you are shopping for the best reverse mortgage interest rate, be sure to first compare the programs payment options explained in detail below.
Many prospects first gravitate to a fixed rate but find the mandatory lump sum unattractive when compared to the flexibility of a line of credit option or monthly payment plans featured on variable interest rate options.
How Interest Rates Affect Your Available Loan
The agency announced in late august that it would be making several changes to HECM loans that will impact borrowers- both in terms of how much they will pay to get a reverse mortgage, and how much they’ll be able to borrow.
One of the big changes is that the amount you will be able to borrow with a HECM loan depends largely on current interest rates.
The amount of home equity you can borrow is tied directly to the interest rate available at the time you get your reverse mortgage.
Just like in the “forward” mortgage market, your interest rate determines the amount of interest you’ll pay.
But in the reverse mortgage market, the current interest rate also determines the amount you can borrow.
All HECM reverse mortgages use a specific table provided by the Department of Housing and Urban Development to determine loan amounts for borrowers.
This amount is called the “principal limit”. The principal limit depends mainly on three factors: the borrower’s age, the home value, and current interest rates.
From home to home and borrower to borrower, every loan amount will be different. After October 1, the percentage of home equity that borrowers can access will range from around 27% to 75%.
Older borrowers can access a greater percentage of home equity than their younger counterparts.
2020's Reverse Mortgage Principal Limit Factors
Age of Borrower Principal Limit Factor Current Lending Limit
65 54.2% $765,600
70 57.6% $765,600
75 60.9% $765,600
85 68.5% $765,600
90 73.0% $765,600
PLF tables source: https://www.hud.gov/sites/documents/august2017plftables.xls
Tip #2: Each Monday afternoon the expected rate updates (taken from the 10 yr. swap rate) and creates an adjustment to all HECM lenders software and their principal limit factors.
When you compare lenders rates & fees, be sure to receive written quotes within the same calendar week, preferably Tuesday-Friday.
This will give you the most accurate side-by-side interest rate comparison.
Program Types & Payment Options
Reverse mortgage Fixed Rates
- Payment options: Single lump sum disbursement.
- Interest rate: Fixed rate for the life of the loan. The interest rate remains the same for the life of the loan but requires a single lump sum disbursement at the time of closing.
If you are using the reverse mortgage for a new home purchase or are already taking most of your available funds at closing to pay off another mortgage balance you might find this plan the most appealing.
Reverse mortgage Adjustable-rates, or ARMs:
- Payment options: Single lump sum disbursement, line of credit, term, tenure.
- Interest rate: Annual adjustable with a periodical change of up to 2% with a lifetime cap rate of 5% over the start rate.
Monthly adjustable option comes with a no periodical caps and a lifetime cap rate of 10% over the start rate.
Generally, interest rates are slightly lower than with fixed-rate mortgages but offer greater flexibility with additional payment plans such as the open line of credit, term and tenure plans.
The adjustable rate plans come as either a monthly or annual adjustable.
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 effect 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 continue to rise.
Adjustable Rates Offer Greater Flexibility
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 HECM 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 HELOCs.
Third option is a monthly payment option which can be set over a specific period 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.
How Interest Rates & Margins Affect the Principal Limit
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 who run the numbers receive 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 the rate on a fixed rate or the margin on an adjustable rate that is being quoted.
Tip #3: An increase in future interest rates may not necessarily be a bad thing, especially for those with the line of credit plan as a rise in future rates are also matched in the guaranteed line of credit growth rate.
E.g., if your interest rate rises by 1%, your LOC growth rate will increase by the same rate.
The higher rates go, the larger your line of credit will grow!
Annual Libor Index History
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 calculating adjustments to interest rates for monthly adjusting Home Equity Conversion Mortgages.
Below is a chart of the annual LIBOR rates over the last 25 years.
LIBOR loans normally have lower margin rates than CMT (constant maturity of U.S. treasuries).
This is particularly helpful to senior borrowers since 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.
If you had an annual adjustable rate in January 2001 with a 2.50% margin your fully indexed note rate would have been 7.67% (+.50% MIP) for a total interest charge to your outstanding loan balance of 8.17%.
Note: That same reverse mortgage in 2001 with an open line of credit would have grown in availability by that same rate of 8.92%
Example: $200k Line of credit would grow in availability by $1,486.66 which then compounds month after month, year after year.
Be sure to read more about this important line of credit growth rate.
Where we are now:
Index Rate Resource: https://www.macrotrends.net/2515/1-year-libor-rate-historical-chart
Top 5 FAQs
What is the current interest rate for a reverse mortgage?
Presently the lowest fixed interest rate on a fixed reverse mortgage is 3.06% (4.06% APR), and variable rates are as low as 2.13% with a 2.00 margin. Disclaimer: interest rates are subject to change without notice.
How do interest rates affect reverse mortgages?
The current interest rate environment has a direct effect on the available reverse mortgage principal limit. The higher the interest rate, the lower the available proceeds to the borrower. In 2020 you will see variable rates offering larger payouts over fixed programs as the expected rates on variable produce a higher principal lending limit.
How does the margin work on a variable reverse mortgage?
The lender will adjust your interest rate by taking the margin and adding it to the corresponding index. E.g., if you have an annual adjustable rate every 12 months the lender will adjust your current interest rate by taking the 12-month libor index value and adding it to your margin. At the time of application, you can negotiate the lenders margin which usually comes with varying sets of closing costs. Generally, the lower the margin the higher the initial closing costs.
When is the rate locked on a reverse mortgage?
The actual note rate is locked at the time of final loan documents. However, your available principal limit is locked in at application for 120 days. This allows for your loan proceeds to be locked in even if rates were to move up prior to your final lock at closing.
Can you make monthly payments on a reverse mortgage?
Yes! At any time, you can repay interest only or principal plus interest without penalty. Each month you will receive a statement that outlines interest charges and your outstanding loan balance. There is no coupon to remit a payment however, so you’ll need to write a check back to the loan servicer for any amount you would like to repay.