If you’ve been researching reverse mortgage rates, you may have noticed something confusing: sometimes two different interest rates are mentioned for the same loan. At first glance, that can feel overwhelming or even concerning, but there’s a very good reason for it.

Understanding how reverse mortgage rates work can help you make more confident, informed decisions about whether this type of loan fits into your retirement plan. Let’s break it down in a clear, straightforward way.

Why Some Reverse Mortgages Have Two Interest Rates

Not all reverse mortgages have two interest rates. This structure applies primarily to the most common type of reverse mortgage: the adjustable-rate Home Equity Conversion Mortgage (HECM).

HECMs are insured by the Federal Housing Administration (FHA) and regulated by the U.S. Department of Housing and Urban Development (HUD). Because these loans are federally insured for the life of the borrower, HUD requires a conservative and transparent approach to how reverse mortgage rates are calculated.

As a result, lenders must use two different interest rates, each with a distinct purpose:

• The Expected Rate (a long-term forecast)
• The Note Rate (the short-term, actual interest rate)

This dual-rate structure protects both borrowers and the FHA insurance fund by separating long-term planning assumptions from short-term market fluctuations.

What Is the Expected Rate?

The expected rate is a long-term interest rate projection used primarily to calculate how much money a borrower qualifies for at closing.

How the Expected Rate Is Used

• Determines initial loan proceeds
• Affects available credit line and payment options
• Helps ensure the loan remains sustainable over time

How It’s Calculated

The lender margin is added to the weekly average of the 10-year Constant Maturity Treasury (CMT).

Why It Matters

• Higher expected rates at origination generally mean lower available proceeds
• Lower expected rates at origination generally mean higher available proceeds

In other words, expected rates play a major role in how much equity you can access when you first take out a reverse mortgage. The other factors considered are your age and home value.

What Is the Note Rate?

The note rate is the actual interest rate applied to your loan balance after closing. This rate determines how interest accrues over time and how a reverse mortgage credit line grows. When you get a reverse mortgage proposal, pay special attention to the comparison page and the amortization schedule. These pages will show the estimated loan proceeds and how your loan (and any funds available) may grow and change over time.

How the Note Rate Is Used

• Calculates ongoing interest accrual
• Impacts the growth of unused credit line funds

How It’s Calculated

The lender margin is added to the weekly average of the 1-year Constant Maturity Treasury (CMT) and then rounded to the nearest ⅛% (0.125%).

Why It Matters

• Rising note rates lead to faster interest accrual and faster credit line growth
• Falling note rates result in slower interest accrual and slower credit line growth

This is why reverse mortgage rates don’t just affect cost—they also influence long-term flexibility and access to funds. Sometimes, when you’re using the reverse mortgage funds for long term planning, a higher reverse mortgage rate can be beneficial as the funds available are growing at a higher rate.

Why Two Reverse Mortgage Rates Are Actually a Good Thing

Using short-term interest rates to determine long-term borrowing capacity would introduce unnecessary risk. Instead, HUD requires a long-term forecast (expected rate) to determine loan proceeds and a short-term rate (note rate) to manage ongoing loan performance.

This structure helps:

• Prevent over-borrowing
• Protect home equity
• Maintain the long-term stability of the FHA mortgage insurance program

Understanding this distinction is key to understanding reverse mortgage rates as a whole.

Why Reverse Mortgage Rates Can’t Be Quoted Online

While online tools and calculators can be helpful for education, reverse mortgage rates are not one-size-fits-all.

Only a licensed loan originator can:

• Provide accurate, current reverse mortgage rates
• Explain how expected rates and note rates apply to your situation
• Walk through personalized scenarios based on your goals, home value, and age

Generic calculators and third-party tools cannot legally quote rates or provide individualized loan terms.

Get Clear, Personalized Reverse Mortgage Rate Information

If you’re exploring reverse mortgage rates and want reliable, straightforward information, we’re here to help.

📞 Only a licensed loan originator can provide reverse mortgage rates.
Our team is happy to explain your options, answer your questions, and help you understand how rates impact your retirement strategy—with no obligation and no pressure.

Call us today to get the information you need to make a confident decision.