Reverse Mortgage Loans Interest Rates Explained

Interest rates for Reverse Mortgages are commonly adjustable. The interest rates will vary depending on the type of reverse mortgage you select.

HECM and Fannie Mae Loan Fees

• For the most popular reverse mortgage, the HECM loan, the interest rate is adjusted either monthly or annually, (whichever you, the borrower chooses) based on an index called the "1 - Year U.S. Treasury Constant Maturity Rate," which changes on a weekly basis.
   
• For HECM loans that adjust monthly, the interest rate charged on the Loan for the next month is equal to the current "1 - Year Treasury" rate plus 1.5%.
   
• For HECM loans that adjust annually, the interest rate charged on the loan for the next year is equal to the current "1 - Year Treasury" rate plus 2.1%.
   
•  For Fannie Mae HomeKeeper loans, the interest rate charged on the loan for the next month is equal to the current "1-Month Certificate of Deposit Secondary Market Rate" plus 3.4%. The HomeKeeper loan has a lifetime cap of 12% over the start rate at the time the loan closed. (for example, if your loan closed at a rate of 6.5%, the lifetime cap would be 18.5%) The interest rate on this loan adjusts monthly.
   
• For the Financial Freedom Cash Account loans, the interest rate charged on the loan for the next six months is equal to the current LIBOR rate (London InterBank Offered Rate) plus a margin. The margin is 5% for the Standard Option Cash Account and 4% for the other two higher benefit Option Cash Accounts.

Current interest rates for all of the indexes mentioned above are published daily online and in the financial or business sections of all major newspapers. Interest charged on reverse mortgages is "accrued", which means there is no payment of interest until the loan comes due.