Lenders used to offer various interest rate options, including fixed, capped, and variable rates. But now, reverse mortgage loans are only offered with variable interest rates.
A reverse mortgage with a variable rate may offer flexible repayment alternatives, and you might not be penalized for making additional installments. This can enable you to pay back the loan more quickly.
In reverse mortgages with variable rates, offset accounts or redraw capabilities may also be included.
Reverse mortgage interest rates are typically one or two percentage points higher than house loan interest rates. This is because there is no obligation for principal reduction with reverse mortgage loans (regular, ongoing principal and interest repayments). In other words, lenders won’t receive any of their money back for decades, if not for many years.
This raises their funding costs, which causes a rise in the retail interest rate that the borrower must pay.
Your loan’s interest rate for a reverse mortgage is significant. Still, it is only one of many elements that will affect the overall cost.
Other considerations include your “longevity risk” — how long you will need the Reverse Mortgage loan; whether you withdraw the funds as a lump sum, cash reserve, or a regular installment plan; any ongoing Reverse Mortgage expenses.
To completely comprehend the interest rates associated with this credit product, speak with us, the reverse mortgage brokers, from our network of lenders, our specialists will assist you in locating the lowest rate.