Current Reverse Mortgage Rates: Today's Rates, APR | ARLO™ (2023)

FAQs

What is today's interest rate on a reverse mortgage? ›

Overall, Suze's opinion on reverse mortgages is that they should be a last resort for older Americans who need extra income. She recommends exploring other options first, such as downsizing to a smaller home or taking out a home equity line of credit.

Does AARP recommend reverse mortgages? AARP does not recommend for or against reverse mortgages. They do however recommend that borrowers take the time to become educated so that borrowers are doing what is right for their circumstances.

Interest Rates and Age

The older a borrower is, the more they can get from a reverse mortgage. Each year older gets about 1% more of the value. However, higher interest rates dramatically reduce the maximum loan amount and eat up the gains from being older.

The interest rate for a fixed rate reverse mortgage is typically the same across all lenders but borrowers can choose to pay discount points to lower their rate.

opens in a new windowDave Ramsey, an influential personal finance guru, has called reverse mortgages a “scam”. He argues that the cost of these loans is so high that they can wipe out your savings and leave you with debt instead of a nest egg.

A reverse mortgage increases your debt and can use up your equity. While the amount is based on your equity, you're still borrowing the money and paying the lender a fee and interest. Your debt keeps going up (and your equity keeps going down) because interest is added to your balance every month.

But a reverse mortgage comes with several downsides, such as upfront and ongoing costs, a variable interest rate, an ever-rising loan balance and a reduction in home equity.

With the next Federal Reserve meeting coming up on May 3, 2023, it's uncertain if the Fed will keep interest rates in a holding pattern through the spring. Both the Fed and experts are predicting another 0.25% rate hike for May.

Will mortgage interest rates go down in 2023? ›

Fannie Mae sees the average rate of a 30-year fixed getting to 6.8% in 2023. Meanwhile, the prediction from Freddie Mac is 6.4%. The Mortgage Bankers Association is the real outlier, projecting the 30-year rate at 5.2% next year.

When it becomes more attractive to save money, consumers tend to spend less of it. But the Fed isn't done fighting inflation. And because of that, consumers should not expect interest rates to drop in 2023. However, rates may also not climb much from where they are today.

Home Equity Conversion Mortgages (HECMs), the most common type of reverse mortgage loan, are a special type of home loan available to homeowners who are 62 and older.

A Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, is a special type of home loan only for homeowners who are 62 and older. A reverse mortgage loan, like a traditional mortgage, allows homeowners to borrow money using their home as security for the loan.

Reverse mortgages give homeowners aged 62 and older the opportunity to get tax-free cash payments while remaining in their home. This income can serve as a much-needed source of funds to pay for retirement expenses. The most common type of reverse mortgage is a Home Equity Conversion Mortgage (HECM).

Typically, a reverse mortgage loan is more expensive than other home loans. With a reverse mortgage loan you will owe the money you borrowed as well as interest and fees. Unlike traditional mortgage loans, the amount you owe on a reverse mortgage loan will grow over time.

There are several kinds of reverse mortgage loans: (1) those insured by the Federal Housing Administration (FHA); (2) proprietary reverse mortgage loans that are not FHA-insured; and (3) single-purpose reverse mortgage loans offered by state and local governments.

The borrower's monthly payment covers both accrued interest and some of the principal. As the loan principal decreases, the amount of interest charged each month also decreases. While the loan's interest rate stays the same, the loan balance decreases as the borrower pays the principal.

Yes, you can sell a house with a reverse mortgage. Your lender cannot force you to sell the home, but you are able to sell it at any time if you choose to do so. However, keep in mind that when you sell the home, your reverse mortgage comes due — and you'll need to pay off the loan balance, plus interest and fees.

There will also be closing costs, which will be higher than those with other reverse mortgage loans. Some of these closing costs may be paid by the seller (depending on your state's laws), so it is a good idea to shop around and talk to multiple lenders after speaking with your reverse mortgage.

What happens to a reverse mortgage when rates go up? ›

As interest rates increase, the amount that you qualify to receive from the reverse mortgage goes down.

Income from reverse mortgages typically doesn't affect a senior's social security or Medicare eligibility and can be used as the senior desires. These benefits can take the financial burden off of a family and enable a senior's estate to pay for long-term care or living expenses when other means are not available.

A reverse mortgage should not affect your Medicare or Social Security benefits. The loan typically does not have to be repaid until 6 months after the last surviving borrower dies, sells the home, or no longer uses the home as a primary residence.

No. When you take out a reverse mortgage loan, the title to your home remains with you. Most reverse mortgages are Home Equity Conversion Mortgages (HECMs). The Federal Housing Administration (FHA), a part of the Department of Housing and Urban Development (HUD), insures HECMs.

Cons of HECM

You have to live in your home: When you get a HECM, your property must be your principal residence for much of the year. You'll have to pay back the HECM if you sell the home or want to move.

A reverse mortgage is commonly paid back by using the proceeds from the sale of the home. If the loan comes due because you've passed away, your heirs will be responsible for handling the repayment and will have a few options for repaying the loan: Sell the home and use the proceeds to repay the loan.

Key Differences Between Reverse Mortgages and HECMs

Reverse mortgages are available to consumers who are 55 and older in most states while HECMs are only available if you are 62 or older. HECMs also have more flexibility in their payout options while reverse mortgages only offer a single-lump sum in most cases.

A big downside to reverse mortgages is the loss of home equity. Because you're not paying down your reverse mortgage balance, you'll make less profit when you sell, or limit your borrowing power if you need a new loan. You'll pay high upfront fees.

The borrower cannot owe more than the value of the home. The lender cannot foreclose on an HECM and the borrower cannot lose the home. The borrower cannot outlive a reverse mortgage. Implications that a reverse mortgage is not a loan, but instead a government benefit or entitlement.

When you – and any co-borrower(s) or an eligible non-borrowing spouse as applicable – have passed away, your reverse mortgage loan becomes due and payable. Your heirs have 30 days from receiving the due and payable notice from the lender to buy, sell, or turn the home over to the lender to satisfy the debt.

What will the Fed interest rate be at the end of 2023? ›

We project a year-end 2023 federal-funds rate of 4.75%, falling below 2.00% by mid-2025. That will help drive the 10-year Treasury yield down to 2.25% in 2025 from an average of 3.5% in 2023. We expect the 30-year mortgage rate to fall from an average 6.25% in 2025 to 4% in 2025. 2) Inflation forecast.

The Fed penciled in a 5-5.25 percent peak interest rate for 2023, after which officials see rates falling to 4.25-4.5 percent by the end of 2024.

These organizations predict that mortgage rates will decline through the first quarter of 2024. Fannie Mae, Mortgage Bankers Association and National Association of Realtors expect mortgage rates to drop through the first quarter of 2024, by half a percentage point to about nine-tenths of a percentage point.

“[W]ith the rate of inflation decelerating rates should gently decline over the course of 2023.” National Association of Realtors (NAR). “[F]orecasts that … mortgage rates will drop—with the 30-year fixed mortgage rate progressively falling to 6.0% this year and to 5.6% in 2024.”

ING predicts rates to range from 5% in the second quarter of 2023, rising to 5.5% in the third quarter, and then falling back to 5% in the final quarter of the year. They also predict interest rates ranging between 3% and 4.25% in 2024, staying at 3% by the end of 2025.

“Inflation continues to ease while the Federal Reserve has switched to smaller interest rate hikes. 2022's higher federal funds rate has started to tame inflation. Thus, mortgage rates will likely stabilize below 6 percent across 2023.”

'I believe by the end of 2023 we will see rates start to fall with a target of between 2.5 to 3 per cent in 2024. 'I believe if the base rate can get back to circa 2.5 per cent, then we will see rates hovering around that mark with a return to products that have not been seen in the mortgage industry for some time.'

The US Federal Reserve will deliver a final 25-basis-point interest rate increase in May and then hold rates steady for the rest of 2023, according to a Reuters poll of economists. The poll also showed that a short and shallow US recession is likely this year.

The Fed raises interest rates again in what could be its final attack on inflation. Federal Reserve Chair Jerome Powell speaks during a news conference at the Federal Reserve in Washington, D.C, on March 22, 2023. The Fed raised interest rates again Wednesday but signalled it may be the last hike for a while.

Who is responsible for repairs on a reverse mortgage? ›

The homeowner is responsible for the upkeep of the home on a HECM. The homeowner continues to bear all the responsibilities of a homeowner, including making repairs and paying taxes and insurance. In a reverse mortgage, there is no regulatory requirement for an escrow account for payment of taxes and insurance.

You may be disqualified from getting a reverse mortgage if you are below age 62, you have less than 50% equity in your home, or you don't have enough income or assets to afford the ongoing costs such as property taxes and homeowner insurance.

Single-purpose reverse mortgages, which are offered by state, local, and nonprofit agencies, are the cheapest and least common form of reverse mortgages.

Overall, Suze's opinion on reverse mortgages is that they should be a last resort for older Americans who need extra income. She recommends exploring other options first, such as downsizing to a smaller home or taking out a home equity line of credit.

The only reverse mortgage insured by the U.S. Federal Government is called a Home Equity Conversion Mortgage (HECM), and is only available through an FHA-approved lender. The HECM is FHA's reverse mortgage program that enables you to withdraw a portion of your home's equity.

A reverse mortgage application process generally takes about 30-45 days from start to finish and has five major steps. However, the longest part of the reverse mortgage loan process is the decision-making process that leads up to the application.

Can I refinance my reverse mortgage? Yes, it is possible to refinance a reverse mortgage loan. Like a traditional mortgage refinance, you will replace your existing loan terms with new terms.

Cons: The downsides of a reverse mortgage

A big downside to reverse mortgages is the loss of home equity. Because you're not paying down your reverse mortgage balance, you'll make less profit when you sell, or limit your borrowing power if you need a new loan. You'll pay high upfront fees.

No, reverse mortgage payments aren't taxable. Reverse mortgage payments are considered loan proceeds and not income. The lender pays you, the borrower, loan proceeds (in a lump sum, a monthly advance, a line of credit, or a combination of all three) while you continue to live in your home.

Reverse mortgages are ideal for retirees who don't have a lot of cash savings or investments but do have a lot of wealth built up in their homes. A reverse mortgage allows you to turn an otherwise illiquid asset into cash that you can use to cover expenses in retirement.

Does a reverse mortgage ever run out? ›

The borrower cannot owe more than the value of the home. The lender cannot foreclose on an HECM and the borrower cannot lose the home. The borrower cannot outlive a reverse mortgage. Implications that a reverse mortgage is not a loan, but instead a government benefit or entitlement.

This is perhaps the greatest risk of a reverse mortgage: You cannot predict the future. Reverse mortgages come with stipulations about which circumstances require immediate repayment or foreclosure on the home. Some outline how many days or months the property can sit vacant before the lender can call the loan.

Single-purpose reverse mortgages.

Some state and local government agencies or nonprofits offer single-purpose reverse mortgages, which are the least expensive reverse mortgage option. You can use them for only the purpose that the lender specifies — for instance, home repairs or property taxes.