If you are thinking of a reverse mortgage, now is the time to proceed. With interest rates rising, you will receive more money now with a 5.300% rate than with the 5.560% rate, which is expected to replace the 5.300% rate in the next few days or weeks.
This higher interest rate may cost you up to several thousands of dollars. The more expensive your home is, the more these higher rates affect you. As interest rates rise, the amount of your equity you will receive goes down.
Unlike forward mortgages, you cannot ‘lock’ your interest rate at the time of your reverse mortgage application.
Two weeks ago, reverse mortgages were closing with a 4.99% rate, last week they were closing at 5.06%. Now, few lenders even offer anything less than 5.30% and many are at 5.560%.
Think of interest rates and the amount you can receive from your reverse mortgage as a see-saw. One end of the see-saw is your equity … the other end is the interest rate. As the rates go higher, the less equity you can access.
If you have a $300,000 home, this change in interest rates can result in $12,000 less than you would have received with a 4.99% rate.