Reverse Mortgage Interest Rates

Many older homeowners find themselves asset-rich but cash-poor as they approach or enter retirement. If you’ve owned your home for decades, chances are most of your net worth is tied up in that property. 

When living on a fixed income, accessing some of that home equity can provide a much-needed financial lifeline to cover expenses, pay for healthcare, renovate the house, or enjoy your golden years more comfortably.

But before you take out this type of loan, you need to understand how reverse mortgage interest rates work. 

What are current reverse mortgage interest rates?

A reverse mortgage allows homeowners 62 and older to borrow against their home’s value tax-free. You receive funds as a lump sum, line of credit, or monthly payments—without having to make any monthly loan payments yourself. 

But interest keeps accumulating on the rising loan balance until the debt eventually comes due when you move out or pass away.

Individual lenders, not the U.S. government, set reverse mortgage interest rates. As a borrower, you may qualify for a range of rates depending on the lender you choose, your loan amount, your age, and your home value. 

As of March 19, 2024, current reverse mortgage interest rates look like this: 

Loan type	Rate range
Fixed-rate HECM	7.560% – 7.930%
Adjustable-rate HECM	6.760% – 7.510%
Fixed-rate HECM for purchase	7.560% – 7.930%
Adjustable-rate HECM for purchase	6.760% – 7.510%
Fixed-rate jumbo reverse mortgages	9.375% – 9.990%
Adjustable-rate jumbo reverse mortgages	11.635% – 11.885%

How do reverse mortgage rates work?

Home equity conversion mortgages (HECMs) are the most popular form of reverse mortgages in the United States. They’re backed by the Federal Housing Administration (FHA) and have a maximum lending limit of $1,149,825 for 2024. 

Jumbo reverse mortgages are proprietary loans offered by private lenders; they typically go up to $4 million. 

Most lenders offer both fixed and adjustable-rate reverse mortgage options. Fixed rates stay the same throughout the loan term, while adjustable rates can fluctuate because they’re tied to an index like the Constant Maturity Treasury (CMT) rate.

Ask the expert

Kyle Ryan

CFP®

Determining whether a fixed or adjustable rate is best depends on a few factors. The most notable factor being: What are the current interest rates, and what are the expectations for interest rates over the life of your loan? In a low-rate environment, adjustable rates tend to start lower, so they could benefit you if interest rates fall, but you run the risk of rates rising higher than they started over the life of the loan if interest rates rise. Therefore, if you plan to be in your home for less than 10 years, I typically go with an adjustable rate (depending on the rate environment and other personalized factors). The benefit of a fixed rate is that the borrower always knows how much interest is being accrued and could refinance later if interest rates drop.

What influences your rate?

Your reverse mortgage interest rate depends on several personal and property-related factors:

Age 

One of the most significant factors in determining your loan rate is your age. The older you are, the higher your rate is likely to be. That’s because lenders expect the loan to be paid back sooner if you’re older.

Your age also affects how big of a loan you can take out. Older homeowners can access more of their home’s equity than younger homeowners because they have a shorter life expectancy.

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Tip

If you sign a reverse mortgage loan within six months of your next birthday, your loan size will be calculated based on how old you’ll be, not how old you are. This means you’ll get approved for a larger loan amount because it’s based on an older age.

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Location 

Like traditional mortgages, reverse mortgage rates can vary by geographic region based on local housing market conditions.

Credit history 

Unlike traditional mortgages, your credit score and history don’t affect the interest rate you’ll get on a reverse mortgage. Lenders still want a decent credit history and no outstanding tax issues or judgments against you.

Lender 

As with any loan, the lender you choose affects the rate you receive. That’s why it’s best to shop around and talk to at least three reverse mortgage lenders to see which has the lowest rates and fees. This part might take some time, but it can save you thousands in interest. 

Reverse mortgage fees 

Reverse mortgage fees don’t directly determine your interest rate but are factored into the annual percentage rate (APR), which represents the actual overall cost. 

The APR combines the interest rate with upfront costs, such as origination fees, mortgage insurance premiums, appraisal fees, and closing costs. So a higher APR indicates more fees attached to the loan.

Major fees to watch for are:

• The origination fee—these can be costly. Look out for these.
• Mortgage insurance premiums (if you have an FHA-insured HECM)
• Servicing fees
• Lender-specific charges

The APR usually includes upfront costs but may not include ongoing costs like annual mortgage insurance premiums. 

Comparing APRs from multiple lenders—not just the interest rate—allows you to find the best total cost. For instance, current fixed-rate HECM rates might start at 7.560%, but the APR might start at 8.996% once you factor in fees.

Federal regulations and the current housing market 

Changes in government regulations and housing market conditions can affect reverse mortgage interest rates over time. For example, if new rules increase lender costs, rates may rise accordingly.

How repayment affects your total interest

The unique part about reverse mortgages is that you don’t make monthly payments. Instead, the loan balance—including interest and fees—keeps growing over time. It all becomes due when you move out, pass away, or can’t meet the loan obligations like paying taxes and insurance.

For example, you take out a $200,000 reverse mortgage at age 70 with a 7% interest rate. 

• In the first year, your interest charge is $14,000 (7% of $200,000). This $14,000 is added to your loan balance, so you now owe $214,000.
• The next year, interest is calculated on that new $214,000 balance at 7%, which equals $14,980. This cycle continues, with interest compounding on top of the growing balance each year at the 7% rate. 
• The longer you hold the loan, the faster the interest accumulates and the higher the eventual repayment amount becomes. By age 85, your loan balance could be over $565,000—all on a $200,000 loan. 

This is why getting the best interest rate is so important—a seemingly small 1% to 2% difference can have a massive impact on your total balance.

How do reverse mortgage rates compare to traditional mortgage rates?

Reverse mortgage interest rates typically run higher than traditional mortgage rates because reverse mortgages carry more risk for lenders—there are no monthly payments, the loan balance grows over time, and the lender must wait until the loan is repaid (often when the home is sold) to recoup their investment.

What is a good reverse mortgage interest rate?

A good reverse mortgage interest rate depends on the type of loan and when you get it, as rates can fluctuate over time. But based on current average rates as of March 2024:

• A good rate for an adjustable-rate HECM is in the 6.760% to 7.510% range. 
• A good rate for a fixed-rate HECM is 7.560% to 7.930% 
• A good rate for a jumbo reverse mortgage might be in the 9.375% to 11.635% range. 

At the time of writing, the lowest adjustable HECM rate is 6.760%, and the lowest fixed rate is 7.560%.

Remember, reverse mortgage interest rates can fluctuate based on your age, home value, location, and the amount you’re borrowing. Some lenders may be able to provide lower rates than the industry average, especially if you have a high-value property or you own your home outright.

Use these tips to get the best possible rate on your reverse mortgage: 

• Shop around. Don’t settle for the first lender you speak with. Compare offers from three to five lenders to find the most competitive rate.
• Get prequalified. Many lenders can prequalify you for a reverse mortgage so you can determine what rates and loan amounts you might qualify for before you apply. 
• Pay attention to APRs. The annual percentage rate shows you the true cost of borrowing including interest and lender fees. A lower APR indicates a better overall deal, so don’t just look at interest rates alone. Pay attention to origination and other one-time fees. These can be massive with HECMs.

Overall, if you do not qualify for a good reverse mortgage, there may be other underlying issues. Why do you need access to your home equity, and is a reverse mortgage the best way to do it?

Kyle Ryan

CFP®