Reverse Mortgage Interest Rates

Adjustable rate reverse mortgage

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 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.