Calculating Rates for Reverse Mortgages

One of the most important things to think about when it comes to your reverse mortgage is the calculation of the mortgage rate or the interest that you may have to pay on the amount of money that you borrow. The interest rate you pay will depend on two important factors:

Whether the loan is a federally insured HECM reverse mortgage

Whether the loan is a “private” non-federally insured reverse mortgage

If the former, the interest rate is tied in with the one year US Treasury security rate.

If the latter, the interest rate is usually set by the private lender.

So why choose the latter? Simply because HECM reverse mortgages are capped at 2% of the property value – allowing little leeway for those requiring a large sum of money.

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