Reverse Mortgage Interest Rates and Closing Costs
One of the first questions that a senior might ask about a reverse mortgage is “what is it going to cost?” The following information gives you details about the reverse mortgage interest rates and reverse mortgage closing costs that may answer one of your first questions.
Reverse Mortgage Interest Rates
For the first 19 years of the FHA-insured reverse mortgage program, the only option available to a borrower was an adjustable rate. It wasn’t until 2007 that the fixed reverse mortgage interest rates option was introduced.
The reason for this is fundamental to how mortgage interest rates are established. A borrower applying for a fixed rate conventional mortgage may choose between a 30-year term or a 15-year term. The borrower who selects the 15-year term will have a lower interest rate than the borrower who elects a 30-year term. What this tells us is that the term of the loan affects the rate.
With a reverse mortgage there is no term. Borrowers may pay off their loan in just a few years, or they may apply for a reverse mortgage at age 62 and could live in their home for another 40 years before the loan is paid. With an uncertain term, it was difficult for the investor community to decide how to set a fixed interest rate for a reverse mortgage. In 2007 a solution was found and fixed rates were introduced.