Industry News & Views

Why do Reverse Mortgages have two rates?

Reverse mortgages, particularly adjustable-rate HECMs, are structured with two interest rates. The “expected rate” is used to determine the initial loan amount at closing. The “note rate” applies after closing and controls how interest builds over time and how the available line of credit grows.

How Do Lower Interest Rates Impact Reverse Mortgages?

When rates are in the news, reverse mortgages should be, too. Fed cuts don’t directly set mortgage rates—markets do. Because HECM guidelines key off Treasury yields (especially the 10-year CMT), even small dips can increase a borrower’s proceeds. Case in point: with a 2.50% margin, the expected rate moved from 6.69% to 6.55% in a few days—boosting one client’s available funds by $9,075. If you or your borrowers are considering a reverse mortgage, lower rates may unlock more cash or line of credit, translating into real flexibility and peace of mind in retirement.