Reverse Mortgage Interest Rates
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.
Adjustable rate reverse mortgage
Adjustable reverse mortgages have interest rates that increase or decrease as a market interest rate index changes. The index used today is the LIBOR.
LIBOR stands for “London Inter-Bank Offered Rate”. The LIBOR is a popular alternative to the Treasury Rate (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 loan with a total interest rate of 5.10% is calculated using a margin of 3.00% and an interest rate index of 2.10%.
Annual Percentage Rate (APR)
The annual percentage rate (APR) si the amount of interest on the loan amount that you will pay annually. The APR reflects not only the interest rate but also the points and other charges that had to be paid to get the loan.