Who Controls Interest Rates On A Reverse Mortgage?

Who Controls Interest Rates On A Reverse Mortgage? Read here to find out who controls the interest rate on your reverse mortgage!

A reverse mortgage is a very popular financial product for senior citizens. One of the most common questions of reverse mortgage borrowers is who controls interest rates on a reverse mortgage. Interest rates on a reverse mortgage are controlled by a couple different entities.

Government Entities

The first entity that controls interest rates on a reverse mortgage are government entities. Most reverse mortgages come with interest rates that are based off of government set interest rates. Currently, interest rates set by the government are quite low, which makes reverse mortgages quite attractive to potential borrowers. However, as the economy improves, the government is bound to raise interest rates in an attempt to curb inflation. If this occurs, rates on reverse mortgages will increase.

The Reverse Mortgage Lender

The next entity that controls interest rates on a reverse mortgage is the reverse mortgage lender. Most reverse mortgages come with an interest rate that is based off either market rates or government set interest rates. However, the reverse mortgage lender has the right to charge a spread on top of the market rate. The spread is normally expressed as a percentage on top of the market rate. This spread can vary from lender to lender.

Cap On Interest Rate

While a reverse mortgage lender can partially control interest rates on a reverse mortgage, they are normally not allowed too charge too high of an interest rate. Federal laws normally prevent these lenders from offering extremely high rates. Also, if the reverse mortgage comes with a variable rate that changes when market rates change, the max that the interest rate can be is also normally capped to prevent the rate from getting too high.

Related posts:

1. How Are Interest Rates Calculated For A HECM Reverse Mortgage Loan?
2. How are the interest rates computed for a HECM reverse mortgage?
3. How Do I Compare Interest Rates For A Reverse Mortgage?
4. How Are The Interest Rates Computed For HECM Reverse Mortgages?
5. How Do I Compare Interest Rates For A Reverse Mortgage?

This entry was posted on Friday, March 12th, 2010 at 1:40 pm and is filed under reverse mortgage. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.