Mary Thompson spent three years researching reverse mortgages before finally calling a lender. Her biggest question? “Why won’t anyone just tell me what the rate actually is?” She’s not alone. Reverse mortgage rates confuse millions of homeowners because they work differently than traditional mortgages, and lenders don’t advertise them like regular loan rates.
Understanding reverse mortgage rates matters more than you might think. The rate you get determines how much equity you’ll have left in your home years from now. A difference of just 1% can mean tens of thousands of dollars over a 20-year period.
This guide breaks down everything about reverse mortgage rates in plain language. You’ll learn what rates look like right now, how lenders calculate them, what factors push your rate up or down, and the real costs beyond just the interest rate. By the end, you’ll know exactly what questions to ask lenders and how to compare offers properly.
📌 Quick Answer
What are reverse mortgage rates?
Reverse mortgage rates typically range from 5% to 7% for adjustable-rate loans and 6% to 8% for fixed-rate loans in 2025. These rates include the lender’s margin (1% to 3%) plus an index rate like SOFR. Your actual rate depends on your age, home value, location, and chosen payment structure. Most borrowers choose adjustable rates because they offer more flexible payment options.
How Reverse Mortgage Rates Work?
Reverse mortgage rates operate on a completely different model than traditional mortgages. Instead of you paying the lender each month, the lender pays you, and interest accumulates on your loan balance. Think of it as your mortgage running backward.
Here’s what makes these rates unique: they’re almost never advertised publicly. While you can check conventional mortgage rates on any banking website, reverse mortgage rates stay hidden until you actually apply. Lenders base your rate on multiple factors that change daily, making it impossible to quote a universal rate.
The rate structure breaks into two components. First, there’s an index rate that fluctuates with market conditions. Most lenders use SOFR (Secured Overnight Financing Rate), which replaced LIBOR in recent years. This index changes constantly based on Federal Reserve policy and broader economic factors. Second, lenders add their margin on top of the index. This margin stays fixed for your entire loan and represents the lender’s profit. A competitive margin ranges from 2% to 2.5%, while higher margins around 3% to 4% should raise red flags.
Your interest accrues monthly and compounds, meaning you pay interest on the interest. If you borrow $100,000 at 6% annually, you won’t owe $106,000 after one year. The monthly compounding means you’ll owe slightly more because each month’s interest gets added to your balance before calculating the next month’s interest. Over decades, this compounding effect significantly impacts how much equity remains in your home.
Current Reverse Mortgage Rates in 2025
Right now, reverse mortgage rates sit higher than they did three years ago, reflecting the Federal Reserve’s interest rate policies. Adjustable-rate reverse mortgages typically range from 5.5% to 6.8%, while fixed-rate options run between 6.2% and 7.5%. These ranges vary by lender, and your individual rate depends on factors we’ll cover shortly.
Adjustable rates dominate the reverse mortgage market for good reason. They offer flexible payment options that fixed rates can’t match. With an adjustable rate, you can choose a line of credit, monthly payments, a lump sum, or any combination. The line of credit option includes a unique feature where your available credit grows over time at the same rate as your loan balance. This growth feature doesn’t exist anywhere else in consumer lending.
Fixed-rate reverse mortgages lock your rate but force you to take all your money upfront as a lump sum. You can’t access more money later, and you don’t get the growing line of credit benefit. Most financial advisors recommend fixed rates only if you need a large amount immediately for a specific purpose, like paying off an existing mortgage or covering major medical expenses.
The spread between adjustable and fixed rates averages about 0.5% to 1%. That might not sound significant, but combined with the flexibility difference, adjustable rates make more financial sense for most borrowers. The main exception involves borrowers who deeply value payment certainty and won’t need additional funds later.
Market trends suggest rates will gradually decline through 2025 as inflation moderates. However, reverse mortgage rates won’t drop as dramatically as conventional mortgage rates because the risk profile differs. Lenders face uncertainty about how long you’ll stay in the home and when they’ll recover their money, which keeps rates elevated compared to traditional mortgages.
What Factors Affect Your Reverse Mortgage Rate?
Your individual rate isn’t random. Lenders evaluate several specific factors to determine what rate they’ll offer you.
Age makes the biggest difference. The older you are, the better rate you’ll typically receive. A 75-year-old usually gets a rate 0.25% to 0.5% lower than a 62-year-old, all else being equal. This happens because lenders expect older borrowers to use the loan for fewer years, reducing their risk. The youngest eligible age is 62, and rates improve gradually as you age.
Home value and location matter more than most realize. Expensive homes in strong real estate markets often qualify for better rates because lenders feel confident about the collateral. A $800,000 home in a stable suburban area might get a better rate than a $300,000 home in a declining rural market. Geographic location affects rates independent of home value too. Some lenders charge slightly higher rates in states with expensive foreclosure processes or strict lending regulations.
Your loan-to-value ratio influences the rate. If you’re borrowing a smaller percentage of your home’s value, some lenders reward you with a lower rate. Taking out $150,000 on a $500,000 home (30% LTV) demonstrates more equity cushion than taking $250,000 (50% LTV), even though the higher absolute amount means more profit for the lender.
Credit score plays a smaller role here than with conventional mortgages. You don’t need good credit to qualify for a reverse mortgage, but a higher credit score might shave 0.125% to 0.25% off your rate with some lenders. Others ignore credit scores entirely when setting rates, focusing instead on your home value and age.
The lender you choose dramatically impacts your rate. Different lenders use different margins, and those margins represent their profit. Shopping among at least three lenders often reveals rate differences of 0.5% to 1%, which translates to thousands of dollars over the life of your loan. National lenders don’t automatically offer better rates than regional ones, so cast a wide net when comparing.
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The Real Cost Beyond Interest Rates
Focusing only on the interest rate misses half the picture. Reverse mortgages come with substantial upfront costs that affect your break-even timeline and total expense.
Origination fees run up to $6,000 or 2% of your home’s value, whichever is less. Some lenders charge the maximum, while others negotiate these fees down or waive them entirely in competitive markets. A $400,000 home could face $6,000 in origination fees, which immediately reduces how much cash you actually receive.
FHA mortgage insurance premiums add another significant cost. You pay 2% of your home’s appraised value upfront, then 0.5% of your loan balance annually. On that same $400,000 home, expect $8,000 upfront plus ongoing annual charges. This insurance protects you if your loan balance ever exceeds your home’s value, ensuring you’ll never owe more than the home is worth.
Third-party closing costs including appraisal fees, title insurance, recording fees, and inspection charges typically total $2,000 to $4,000. These costs are similar to regular mortgage closing costs. You can roll all these expenses into your loan balance rather than paying them out of pocket, but that means you’re paying interest on the fees for years to come.
Servicing fees add an ongoing monthly charge of $30 to $35 that gets added to your loan balance. Over 20 years, these small fees compound to over $10,000. Some lenders include unlimited servicing fees in their structure, while others cap them at a certain amount.
When you calculate the total cost, a reverse mortgage with a 6% interest rate actually costs more like 7% to 8% annually when you factor in all these fees. That’s why some borrowers with other options, like a home equity line of credit with a 7% rate and minimal fees, might find the HELOC cheaper overall despite the higher rate.
How to Get the Best Reverse Mortgage Rate?
Shopping for a reverse mortgage requires a different approach than comparing conventional mortgages. Here’s how to ensure you’re getting a competitive deal.
Start by requesting quotes from at least three different lenders. National companies like AAG, Finance of America Reverse, and Longbridge Financial compete with regional lenders and credit unions. Each calculates rates differently, and you won’t know which offers the best terms until you compare written quotes side by side.
Ask each lender for their margin explicitly. This number matters more than the current rate because the margin stays with you forever while the index fluctuates. A lender quoting 6.5% today with a 2% margin will beat a lender offering 6.25% with a 3% margin once rates change. Focus on finding the lowest margin possible.
Time your application strategically. If rates are trending downward and you’re not in a rush, waiting a few months could save you significant money. However, if rates are rising or you need funds soon, locking in today makes sense. Unlike conventional mortgages, you can’t easily refinance a reverse mortgage without paying all the upfront costs again.
Negotiate the origination fee aggressively. Many lenders will reduce or eliminate this fee to win your business, especially if you mention competing offers. Some might offer a slightly higher rate in exchange for zero origination fees, which can be a good trade-off depending on how long you plan to stay in the home.
Consider working with a reverse mortgage counselor before applying. HUD requires counseling for all reverse mortgage applicants, but good counselors do more than check a box. They’ll review your financial situation and might suggest alternatives that cost less than a reverse mortgage if those options fit your needs better.
Read the fine print about rate adjustments. Adjustable-rate loans have caps on how much the rate can change per adjustment period and over the life of the loan. A loan with tighter caps (like 2% annual cap and 5% lifetime cap) protects you better than one with looser caps (3% annual and 10% lifetime), even if the starting rate is slightly higher.
Reverse Mortgage Rates vs. Other Loan Options
Before committing to a reverse mortgage, consider whether other financing options might serve you better at a lower cost.
Home equity loans and HELOCs currently offer rates between 6.5% and 9%, depending on your credit score and loan-to-value ratio. While these rates are similar to reverse mortgages, the fee structures differ dramatically. A HELOC might charge $500 in closing costs compared to $15,000+ for a reverse mortgage. If you can afford monthly payments, a HELOC wins on total cost.
Cash-out refinancing makes sense if you have an existing mortgage with a high rate. You might refinance into a lower rate while pulling out cash, effectively paying less interest than you do now while accessing your equity. This only works if current rates are lower than your existing mortgage rate and you qualify for a new conventional loan.
Selling your home and downsizing offers the most equity access with zero loan costs. You pocket the difference between your current home’s value and a cheaper replacement property. The downside is leaving your neighborhood and dealing with moving expenses and hassle.
Reverse mortgages make the most sense when you want to stay in your home, don’t want monthly payments, have limited income but substantial home equity, and plan to live there for many years. They’re particularly valuable for borrowers who can’t qualify for traditional financing due to low income or poor credit.
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Conclusion
Reverse mortgage rates in 2025 range from 5.5% to 7.5% depending on whether you choose adjustable or fixed rates. Your specific rate depends on your age, home value, location, and the lender you select. Beyond the interest rate, upfront costs including origination fees and FHA insurance significantly impact the total expense.
Shopping among multiple lenders remains crucial. Rate differences of 0.5% to 1% are common, and aggressive negotiation often reduces origination fees substantially. Focus on getting the lowest margin possible, since that number affects you more than the current rate in the long run.
Reverse mortgages work best for homeowners who want to age in place, need to supplement retirement income, and don’t want monthly loan payments. If you can qualify for a HELOC and afford the payments, that option typically costs less overall. Compare all your options carefully and consider consulting a fee-only financial advisor before proceeding with any home equity strategy.
FAQs
What is a good reverse mortgage rate in 2025?
A competitive reverse mortgage rate in 2025 falls between 5.5% and 6.5% for adjustable-rate loans, with a lender margin of 2% to 2.5%. Fixed-rate loans should be under 7%. Your rate depends on your age and location, but if quotes exceed these ranges significantly, shop around more. The margin matters more than the current rate because it stays fixed while the index fluctuates. Always get quotes from at least three lenders before deciding.
Do reverse mortgage rates change over time?
Yes, if you have an adjustable-rate reverse mortgage, your rate changes monthly or annually based on the index it’s tied to (usually SOFR). The lender’s margin stays fixed, but the index portion fluctuates with market conditions. Most adjustable-rate reverse mortgages have caps limiting how much the rate can increase per adjustment period and over the loan’s lifetime. Fixed-rate reverse mortgages lock your rate permanently, but you must take all proceeds upfront as a lump sum.
How do reverse mortgage rates compare to regular mortgage rates?
Reverse mortgage rates run 1% to 2% higher than conventional mortgage rates for comparable loan terms. In 2025, conventional 30-year fixed mortgages average around 6% to 7%, while reverse mortgages range from 5.5% to 7.5%. The higher rates reflect increased risk for lenders, since they don’t receive monthly payments and the loan balance grows over time. Reverse mortgages also carry substantially higher upfront costs, with fees often exceeding $15,000 compared to $3,000 to $5,000 for conventional mortgages.
