Reverse Mortgage Interest Rates: What Borrowers Need to Know

Interest rates play a central role in determining how much you can borrow with a reverse mortgage, how quickly your loan balance grows, and how much equity remains in your home over time. Unlike a traditional mortgage where you make monthly payments to reduce the balance, a reverse mortgage balance grows because interest accrues on the amount you have borrowed. That makes understanding rates even more important.

How Reverse Mortgage Rates Are Set

Reverse mortgage interest rates are composed of two parts: a benchmark index and a lender margin.

The Benchmark Index

Most adjustable-rate HECMs are tied to either the Constant Maturity Treasury (CMT) rate or the Secured Overnight Financing Rate (SOFR). These are market-driven rates that fluctuate based on broader economic conditions, Federal Reserve policy, and investor demand for government securities.

• 1-Year CMT: Based on the yield of 1-year U.S. Treasury securities. This has historically been the most common index for HECM adjustable-rate loans.
• SOFR: A newer benchmark that replaced LIBOR. Some lenders have begun using SOFR-based products, though CMT remains more common for HECMs.

Fixed-rate HECMs do not use an index. Instead, the rate is set by the lender and locked for the life of the loan.

The Lender Margin

The margin is the lender's markup above the index rate. For adjustable-rate HECMs, typical margins range from 1.5% to 3.0%. The margin stays constant for the life of the loan -- only the index changes.

For example, if the 1-year CMT is 4.5% and the lender's margin is 2.0%, your initial interest rate would be 6.5%. If the CMT drops to 3.5% at the next adjustment period, your rate would decrease to 5.5%.

The margin is one of the key variables you can compare when shopping for a reverse mortgage. A lower margin means a lower rate over the life of the loan. See our guide to comparing costs by lender for tips on evaluating margins and other terms.

Fixed vs. Adjustable Rates

HECM borrowers must choose between a fixed-rate and an adjustable-rate loan, and this choice has significant implications beyond just the interest rate itself.

Fixed-Rate HECM

• Rate stays the same for the entire life of the loan
• Requires a lump-sum draw -- you must take all available proceeds at closing
• No line of credit option -- you cannot draw funds over time
• Predictability: You know exactly how your balance will grow
• Typically higher rates than the initial rate on an adjustable HECM

Adjustable-Rate HECM

• Rate adjusts monthly or annually based on the index
• Flexible disbursement options: line of credit, monthly payments, lump sum, or a combination
• Rate caps protect against extreme increases (typically 2% per year, 5% lifetime for annual adjustable; 10% lifetime for monthly adjustable)
• Rate can go down if the index decreases
• Usually lower initial rates compared to fixed-rate HECMs

Most financial advisors and HUD-approved counselors recommend the adjustable-rate option for most borrowers because of the flexibility it provides. The line of credit feature, in particular, offers significant advantages -- unused credit actually grows over time at the same rate as the loan balance, giving you increasing borrowing power.

Expected Rate vs. Initial Rate

One of the most confusing aspects of reverse mortgage rates is the distinction between the expected rate and the initial rate.

The Expected Rate

The expected rate is a projection used by FHA to calculate how much you can borrow (your principal limit). For adjustable-rate HECMs, it is typically the 10-year CMT swap rate plus the lender's margin. This rate represents FHA's estimate of the average rate over the life of the loan.

The expected rate directly affects your borrowing power: a lower expected rate means you can borrow more. Even a small difference matters. For example, on a $400,000 home for a 72-year-old borrower, an expected rate of 6.0% might yield a principal limit of $220,000, while an expected rate of 7.0% might reduce it to $195,000 -- a difference of $25,000 in available funds.

The Initial Rate

The initial rate is the actual interest rate charged on your loan balance when the loan begins. For adjustable-rate HECMs, this is typically the current index value plus the margin, which is often lower than the expected rate. Your initial rate determines how quickly your balance grows in the early years of the loan.

How Interest Rates Affect Borrowing Power

The relationship between interest rates and how much you can borrow is inverse and significant. When rates are higher, FHA reduces the percentage of your home's value you can access because the projected loan balance will grow faster.

Three factors together determine your principal limit (maximum borrowing amount):

1. Your age (older borrowers qualify for more)
2. Your home's appraised value (up to the FHA lending limit)
3. The expected interest rate (lower rates mean higher borrowing limits)

This is why rate shopping matters so much. Two lenders quoting different margins can result in meaningfully different expected rates and, therefore, different amounts available to you. For a deeper look at how these costs add up, read our article on the total cost of a reverse mortgage.

Historical Context

Reverse mortgage interest rates generally follow the same trends as the broader mortgage market, though they tend to be slightly higher than conventional 30-year mortgage rates.

During the historically low rate environment of 2020-2021, HECM rates fell below 3% for some adjustable-rate products, dramatically increasing borrowing power for seniors. As rates rose through 2022-2024 following Federal Reserve tightening, borrowing power decreased and fixed-rate HECMs became less attractive relative to adjustable-rate options.

Looking at the long-term picture, today's rates remain moderate by historical standards. In the 1990s, reverse mortgage rates frequently exceeded 8-9%. Borrowers should evaluate rates in this broader context rather than solely comparing to the recent low-rate environment.

What Rate Should You Expect Today?

As of early 2026, typical HECM rates fall in the following ranges:

• Adjustable-rate HECM (initial rate): Approximately 6.0% to 8.0%, depending on margin and index
• Fixed-rate HECM: Approximately 7.0% to 9.0%

These ranges shift as market conditions change. The most current rate for your situation will depend on which lender you work with and their specific margin. This is another reason why comparing at least three lenders is essential to getting the best deal.

The Bottom Line

Interest rates on a reverse mortgage affect everything from how much you can borrow to how quickly your loan balance grows over time. Adjustable-rate HECMs offer more flexibility and typically lower initial rates, while fixed-rate HECMs provide predictability at a higher cost. The lender margin is one of the most important variables you can compare when shopping, and even small differences in the expected rate can translate to thousands of dollars in available proceeds. Take the time to understand how rates work, and always compare offers from multiple lenders before committing.