You may be wondering about the interest rates on your reverse mortgage. Much like forward mortgages, there are two options – fixed rate and adjustable. Fixed rate reverse mortgages remain constant over the life of the loan, while adjustable rate loans are indexed to a market rate – the London Interbank Offered Rate, or LIBOR – and vary over time.
Historically, all reverse mortgages were adjustable rate. This changed in 2008, when borrowers received the option to receive the entire proceeds of the loan as a lump sum. That’s still the case today – if you want a fixed rate, you will need to take the lump sum payment. If you want to receive monthly payments or take a line of credit, your rate will be adjustable.
Unfortunately, comparison shopping is not as simple for reverse mortgages as it is for conventional home loans. This is another good reason to speak to a few different lenders and compare prices.