Reverse Mortgage Rate Comparison
A common phrase used by persons searching the internet for reverse mortgage information is reverse mortgage rate comparison. The rates used for reverse mortgages can be complicated and confusing to understand. The chart below is intended to clarify the components of reverse mortgage rates and show how reverse mortgage rates compare across the different programs. However, be aware that the reverse mortgage industry is rapidly changing and rates, margins and other terms are subject to sudden change. Alway check directly with the lender for the current terms of their reverse mortgage programs.
| Reverse Mortgage Rate Comparison | ||||
|---|---|---|---|---|
| Reverse Mortgage Type | Base Rate | PLUS: Margin | PLUS: Insurance Premium Charge | EQUALS: Total Reverse Mortgage (Compounding) Interest Rate |
| Monthly Adjustable HECM Reverse Mortgage | The base rate for this type of reverse mortgage is the 1-year constant maturity Treasury Bill Rate as published by the Federal Reserve Board each Monday (Example: the 1-year T-Bill Rate Effective 2/12/07 was 5.07%.) | For many years, Fannie Mae was the sole buyer of HECM loans and set a 1.50% margin at which it would purchase HECMs. In early 2007, however, competition among lenders led to HECM loans being marketed with a reduced margin of 1.00% | FHA adds 0.5% to the interest rate for mortgage insurance premium (MIP). This insurance protects the borrower if the lender fails and also funds the government guarantee that the amount owed on a HECM will never exceed the home’s value. | Using the example figures, interest on the outstanding balance of this loan compounds at 6.57% (assuming a 1% margin). This rate is subject to adjustment each month. |
| Notes: The monthly adjustable HECM has a lifetime cap of 10% over the initial rate (i.e. excluding MIP). In the above example, the interest rate on the loan could not exceed 16.07% over the life of the loan. | ||||
| Annual Adjustable HECM Reverse Mortgage | The base rate for this type of reverse mortgage is the 1-year Treasury Bill Rate as published by the Federal Reserve Board each Monday (Example: the 1-year T-Bill Rate Effective 2/09/07 was 4.77%.) | Fannie Mae currently is the sole buyer of HECM loans and sets the margin at which it will purchase HECMs. (Example: the Monthly Adjusting HECM Margin Effective 2/09/07 was 3.10%.) | FHA adds 0.5% to the interest rate for mortgage insurance premium (MIP). This insurance protects the borrower if the lender fails and also funds the government guarantee that the amount owed on a HECM will never exceed the home’s value. | Using the example figures, interest on the outstanding balance of this loan compounds at 8.54%. This rate is subject to adjustment once per year. |
| Notes: The annual adjustable HECM has a lifetime cap of 5% over the initial rate (i.e. excluding MIP). In the above example, the interest rate on the loan could not exceed 13.04% over the life of the loan. Additionally, the rate on this loan cannot increase more than 2% in a single year. | ||||
| FannieMae HomeKeeper Reverse Mortgage | The base rate (‘index value) for the Home Keeper mortgage is the most current weekly average of secondary market interest rates on one-month negotiable certificates of deposit as published by the Federal Reserve. (Example: the 1-month CD rate effective 2/09/07 was 5.28%.) | This margin is periodically set by Fannie Mae.The margin never changes over the life of the loan and is not tied to the age of the borrower. (Example: Margin effective 2/09/07 was 3.40%.) | There is no separate fee charged for mortgage insurance with the Fannie Mae HomeKeeper. | Using the example figures, interest on the outstanding balance of this loan compounds at 8.625%. This rate is always rounded to the nearest 1/8 and is subject to adjustment each month. |
| Notes: The Fannie Mae HomeKeeper has a lifetime cap of 12% over the initial rate. In the above example, the interest rate on the loan could not exceed 20.625% over the life of the loan. There is no interest rate floor, and there are no annual or other periodic interest rate caps. | ||||
| Financial Freedom Cash Account | 6-month LIBOR Rate as published by the Federal Reserve Board each Monday (Example: the 6-month LIBOR Rate Effective 5/08/07 was 5.35%.) | This margin is periodically set by Financial Freedom. The margin never changes over the life of the loan and is not tied to the age of the borrower. (Example: Margin Effective 5/08/06 was 3.50%.) | There is no separate fee charged for mortgage insurance with the Financial Freedom Cash Account. | Using the example figures, interest on the outstanding balance of this loan compounds at 8.85%. |
| Notes: The Financial Freedom Cash Account has a lifetime cap of 6.5% over the initial rate. In the above example, the interest rate on the loan could not exceed 15.35% over the life of the loan. | ||||
| SunWest Cash Keeper | 1-month LIBOR Rate as published by the Federal Reserve Board each Monday (Example: the 1-month LIBOR Rate Effective 5/08/07 was 5.32%.) | This margin may be periodically set by Sun Wes. The margin never changes over the life of the loan and is not tied to the age of the borrower. (Example: Margin Effective 5/08/06 was 3.50%. A 3.25% margin is available for borrowers paying upfront “discount”.) | There is no separate fee charged for mortgage insurance with the Financial Freedom Cash Account. | Using the example figures, interest on the outstanding balance of this loan compounds at 8.875%. |
Social tagging: Reverse Mortgage Rates
May 29th, 2006 at 7:00 am
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
June 2nd, 2006 at 2:33 pm
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June 6th, 2006 at 5:47 pm
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
June 13th, 2006 at 12:04 pm
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
June 20th, 2006 at 11:26 am
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
July 3rd, 2006 at 7:14 am
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
July 31st, 2006 at 1:42 pm
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
August 2nd, 2006 at 7:01 am
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
August 9th, 2006 at 7:19 am
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
August 16th, 2006 at 10:19 pm
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
September 5th, 2006 at 6:45 am
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
September 5th, 2006 at 4:53 pm
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
September 11th, 2006 at 7:49 am
[...] There is little interest rate competition among reverse mortgage lenders since rates are set according to uniform indices and margin factors. The underlying components of reverse mortgage rates are described in this reverse mortgage rate comparison chart. The table below provides reverse mortgage rates for the current week: [...]
May 13th, 2007 at 10:08 pm
rate for Financial Freedom’s product is 3.5% above 6-month LIBOR, not 5% above…
May 14th, 2007 at 8:54 am
Yes. Thanks for pointing this out. I’ve updated the chart accordingly.
July 12th, 2007 at 1:45 pm
I looked around for competitive pricing my self for some time. The rates are now becoming fixed. My broker told me about some of them that were on th market and that there would be more. They were looking into FF and other institutions to see if they would offer fixed rates. This was back in January 2007. I went ahead with my loan but I would recommend my broker to anyone in California as they are interested in helping you find what you need. Why dont you guys update the rate information I would like to help a friend out.
April 13th, 2012 at 4:55 pm
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