Reverse Mortgage Rates
What kind of Reverse Home Mortgage Rate should I expect to get?
A reverse mortgage is exactly as it sounds, it is a mortgage that works in reverse of a traditional mortgage. Whereas a traditional mortgage is one in which the borrower pays back to the bank in monthly installments plus interest, a reverse mortgage actually pays you back for staying in your home based on the equity in your home. This is an increasingly appealing plan for many retired adults who have paid off their home mortgages but find that they are in need of liquid funds for daily expenses.
Many ask how much the interest is for the reverse mortgage? The reverse mortgage rates are offered in either a fixed-interest or variable-interest rate based on the current prime interest rate. The borrower can decide which term is better for their need and the interest rate will be as close to prime as possible dependent upon those terms. The fixed-rate option will allow the borrower to lock into some of the incredible rates we are currently seeing in the market, while the variable-rate may shift as the interest rates begin to rise as predicted over the next year or two.
Consulting the reverse home mortgage counselors is the first step in learning what the current interest rates are and in discussing the options of a fixed-rate and variable-rate to your reverse home mortgage. The interests rate are at an all time low . Take advantage of your equity at a lower rate than you may have ever paid on your previous mortgage.
Understanding Reverse Mortgage Interest Rates
Adjustable reverse mortgages have interest rates that increase or decrease as a market interest rate index changes. The two indexes that are used today are the LIBOR and CMT.
CMT: CMT stands for "Constant Maturity Treasury". This is more commonly known as a "Treasury Bill" or "T-Bill". LIBOR
LIBOR: LIBOR stands for "London Inter-Bank Offered Rate". The LIBOR is a popular alternative to the CMT for lenders because it is an international index rate instead of being a US-focused index.
Interest rate calculation: The total interest rate is calculated by adding the interest rate index plus a margin set by the lender. For example, a HECM CMT 300 refers to the reverse mortgage program that is using the CMT index and a margin of 300. If the CMT index is 2.10% then the total rate is 2.10% plus the 3.00% margin which equals an interest rate of 5.10%.
Fixed rate reverse mortgage: The fixed rate programs are specific to each lender and are not indexed to published interest rates. To determine the currently available fixed rate, a reverse mortgage lender must prepare a good faith estimate.