Reverse mortgage interest rates: quick answers
- What do current reverse mortgage rates mean?
- They are the rates offered this week on new HECM loans, shown below with the lender margin behind each one. Use them to compare options. They are not a rate offer or a rate lock.
- How are HECM interest rates set?
- An adjustable HECM rate is a published market index plus a lender margin. The index moves with the market. The margin is set when you close and stays the same for the life of the loan.
- What is the expected rate?
- The expected rate is a longer-term index (we track the 10-year Treasury) plus your margin. HUD uses it with the age of the youngest borrower or eligible non-borrowing spouse to set how much you can borrow. It is not the rate charged on your balance.
- Are reverse mortgage rates fixed or adjustable?
- Both exist. A fixed-rate HECM pays out as one lump sum at closing. An adjustable-rate HECM can pay out as a line of credit, monthly payments, a lump sum or a mix, which is why most HECM loans are adjustable.
- How does the line of credit rate work?
- On an adjustable HECM, the unused part of the line of credit grows at the loan’s current interest rate plus the annual FHA mortgage insurance premium rate. Money you draw accrues interest at that rate.
- What can today’s rates tell me?
- They show where the market is this week. Your own rate depends on the margin you choose, lender credits and closing costs, the loan program, and when your expected rate is locked.
How reverse mortgage interest rates work
A HECM has two rates that do different jobs. The note rate is charged on the money you borrow. The expected rate sets how much you can borrow. How each one is set depends on whether the loan is fixed or adjustable.
| Feature | Fixed-rate HECM | Adjustable-rate HECM |
|---|---|---|
| How the rate is set | One rate, set at closing | Market index plus lender margin; adjusts monthly or annually within caps |
| Note rate (charged on your balance) | The fixed rate | Shorter-term index plus margin |
| Expected rate (sets how much you can borrow) | Same as the note rate | 10-year index plus the same margin |
| How you receive money | One lump sum at closing | Line of credit, monthly payments, lump sum or a mix |
| Line of credit growth | No line of credit | Unused credit grows at the note rate plus the annual FHA mortgage insurance rate |
Index plus margin: how HECM rates are set
An adjustable HECM rate has two parts. The index is a published market rate that moves week to week. The margin is the lender’s spread on top of the index. It is set when you close and does not change. Margins differ between lenders and loan options, and they often trade off against lender credits toward closing costs, so compare the margin and the costs together.
Expected rate vs. note rate
The expected rate is the 10-year index plus your margin. HUD’s principal limit tables use it, with the age of the youngest borrower or eligible non-borrowing spouse, to set your principal limit. A lower expected rate generally means a higher principal limit. The note rate (also called the initial rate) is what accrues on the money you draw. On a fixed-rate HECM the two rates are the same.
The HECM line of credit growth rate
With an adjustable HECM, the unused part of your line of credit grows each month at the same rate charged on the balance: the current note rate plus the annual FHA mortgage insurance premium rate. When rates rise, both the credit line growth and the interest on money you have drawn rise with them. Growth is not interest paid to you; it increases how much you can borrow later.
What today’s rates can and can’t tell you
The rates on this page show where the market is this week. They can’t tell you your own rate or proceeds, which depend on the margin you choose, lender credits and closing costs, the program, your age and home value, and when your expected rate is locked. HUD publishes the program rules on its HECM program page.
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Illustrative estimate based on today's pricing for HECM and proprietary reverse mortgages, after estimated lender and closing costs. It is not a loan offer, and your amount depends on your state, appraisal and full application. Get a personalized quote.