Question:

Which index is the reverse mortgage interest rate tied to?

Answer:

HECM - the most popular reverse mortgage program in the US, accounting for 90% of all reverse mortgage loans annually - had its rate tied to the one-year U.S. Treasury security rate only for a long time, but as of 2007 the LIBOR index is also used. The reverse mortgage interest rate is usually limited to a 2% increase annually and 5% increase for the lifetime of the loan.

Whatever index is your RM (reverse mortgage) tied to, have in mind that the amount you owe will increase with an increase of the reverse mortgage interest rate. You have to be aware that upon sale little or no equity may be left for you, when your reverse mortgage debt is settled. However, one good thing is that with most reverse mortgage programs, you can't owe more than what you borrowed in the first place.

If you are planning to invest your reverse mortgage money you will certainly need reliable strategy. Although investing reverse mortgage funds is not recommended, it has to be admitted there are people who are doing it successfully, their investments bringing higher return than the reverse mortgage interest rate accrues.

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Common misspellings: mortage and morgage