Although the Federal Reserve again raised the short-term interest rate yesterday May 4, 2022, the impact on a reverse mortgage loan is both positive and negative.

As interest rates increase, the amount that you qualify to receive at application from the reverse mortgage decreases. However, your current loan balance which needs to be paid off to create additional cash flow, can still be considered as before. The same rules apply including prequalification of the youngest borrowers age, having enough home equity and satisfying a financial assessment. Prequalification standards have not changed; how much you can borrow has been impacted.

 The loan continues to be a great solution!

The unused balance of a HECM line of credit (LOC) wins in this market of increased rates! Unused lines of credit benefit from month over month growth.  The available LOC not only grows when payments are made to the outstanding principal balance, it grows naturally at the same compounding rate as the loan balance. Although payments are not required on the loan balance, it is an option  Higher rates equal faster growth potential for your LOC.

The secure and growing HECM line of credit, can even exceed the home’s value should property values decline and if held for a length of time, high interest rates cause the LOC to grow faster than expected.

This is a terrific and useful solution in financial planning when considering all of the options. Stay flexible!