Interest Rate Questions

There are currently five Federal reverse mortgage programs available in Texas. All are U.S. government adjustable interest rate mortgages. They are usually referred to as "FHA monthly (there are three), FHA annual and the Fannie Mae program", which adjusts monthly.  There are also proprietary mortgages by a private lender.

More Details: The FHA mortgages are Federally Insured Home Equity Conversion Mortgages (HECM) backed by Federal Housing Administration and offered in conjunction with the Department of Housing and Urban Development (HUD). The Fannie Mae mortgage offered by the Federal National Mortgage Association is the Fannie Mae Home Keeper Mortgage designed to offer reverse mortgages as a supplement to HECM programs to address needs not served by HECM such as individuals with higher property values, some condominium owners and seniors wishing to use reverse mortgages to purchase a new home.  Proprietary loans are often nicknamed "Jumbo Reverse Mortgages" because they generally only work for high value homes.

It depends on which program most closely meets your needs. This is not the first decision you should make about a reverse mortgage. At the proper time the loan professional you are working with should assist you. If you decide to work with Reverse Mortgage Texas®, our senior loan officers will carefully help you work through the selection. We do this fairly early in the process.

This is not a "do it yourself decision." Just because most people select a certain program does not mean it is the best one for you. We urge you to consult a professional when making this decision.

Generally, most of our clients select one of the FHA monthly programs, because they provide the most money. However, there are some long term cost advantages to the FHA annual. The Fannie Mae, or a proprietary loan, is used when FHA options will not work.  Homeowners with high value homes may select a proprietary loan option.

When you make application for a reserve mortgage, you will sign and receive a disclosure statement that deals in detail with the rates of the program you selected. You will have this disclosure weeks prior to the mortgage closing. You can stop your reverse mortgage process if you are unhappy with items in the disclosure.

This is the rate most people ask about. We provide it primarily for the use of mortgage loan professionals. Please note the page encourages all of our other website users to read through the interest rate questions. In an effort to give clarity to our users, the accompanying Expected Rate for the HECM Monthly Adjusting Varying Rate is included on the page.

FHA updates these rates after the close of business each Monday. These rates are effective for a week. The updated rates are seldom the same as the previous week.

No.  All reverse mortgage programs available in Texas have either monthly or annually adjustable rates.

FHA Lenders will now guarantee your Principal Limit for 60 days from the date of issue of the FHA Case #, which is soon after the application.  The Principal Limit is the amount you qualify to receive from your Reverse Mortgage. If the Principal Limit is higher at time of closing, you will get the higher amount, which is to your advantage.

Not in Texas.

Probably not. In Texas, all interest rates set by the federal government and do not very from one lender to another. If you shop for interest rates in the same Tuesday through Monday week, the rates quoted to you will be the same. It is important that the rates quoted to you covers all available FHA rates. If you get rates quoted to you in different weekly time blocks, you will probably get different interest rates. The rates that are important are the rates the week you close your reverse mortgage. Please see question 13.  Proprietary rates are currently available from only one lender, who sets the rates.

Not necessarily. The rates are determined differently. Both rates can go up. Both rates can go down. Even if the rates move in the same direction, the percentage point changes from the previous week can be different. Actually one rate can go up and the other rate go down. One rate can remain the same and the other go up or down. Both rates could remain the same. Because of the dynamics of the United Sates economy, these rates usually change weekly. If you want a very detailed explanation of how these rates are set see questions 14 and 15.

The interest starts accumulating when you receive your money.

It depends. With the FHA monthly, the first rate change can occur on the first day of the second month after closing. Rate changes can occur every month thereafter. For example if you closed in January, rate changes could occur beginning in March.

With the FHA annual, the first rate change can occur between 12 and 18 months after closing. The rate changes will occur annually thereafter.

It is important because this rate helps determine how much money will be received from a FHA reverse mortgage. If the age of the homeowners and the value of the home remain the same, the lower the expected rate, the more money available from the reverse mortgage.

This rate does not affect the amount of money a homeowner can receive under the Fannie Mae plan.

Unfortunately, this is a very technical answer. The FHA rates are based on the value of an index that is the Weekly Average Yield on United States Treasury Securities Adjusted to a Constant Maturity of One Year.

To this index a margin of 1.50 % is added for a total interest rate for the FHA Monthly Adjusting Variable Rate program. FHA could change this margin but it has been 1.5 percentage points for the past 14 years.

To this index a margin of 3.10% is added for a total interest rate for the FHA Annually Adjusting Variable Rate program. FHA has changed this margin, but it was 2.1 percentage points for the past 14 years.

For Fannie Mae, the rate is based on one-month CD index published weekly by the Federal Reserve. To this index a margin of 3.58% is added for the total interest rate.  The Federal government does not set the initial rate for proprietary reverse mortgages.

This is a rather technical answer. The FHA rates are based on an index of the annual average of the 10-year T-bill rate that is published weekly. For the FHA Monthly Adjusting Variable Rate program, a margin of 1.5% is added to the index for the initial rate. For the FHA Annual Adjusting Variable Rate program, a margin of 3.10% is added to the index for the initial rate. The FHA expected rate can never be less than 5.5%. FHA uses the same margins that are used with the initial rates.

The Fannie Mae expected rate is the same as the Fannie Mae initial rate.  The Federal government does not set the expected rate for proprietary reverse mortgages.