Are HECM Rates Higher Than Traditional Rates?

Home Equity Conversion Mortgages (HECMs) are the only federally insured reverse mortgages in the U.S. One reason for their popularity is that the mortgage terms are what most would consider advantageous, or at least reasonable.

It’s hard to say what is reasonable at a time when revolving credit card interest rates average 20% or more. Nevertheless, HECM interest rates should be high. After all, the HECM is a non-recourse loan that doesn’t require a regular monthly principal and interest mortgage payment. Combine that with a maturity date of age 150. Surely that must require higher rates, right?

Don’t forget that Dave Ramsey tells us repeatedly that reverse mortgage “interest rates are double” ¹ and that the terms are punitive, designed to prey on the elderly.

“The interest rates that reverse mortgages are calculated on are almost double what traditional interest rates are on a mortgage.” ² Dave Ramsey

Dave even encouraged a listener to get his mother-in-law, caring for her husband with dementia, to refinance out of their reverse mortgage. His advice was to “just go get a [traditional] $200,000 loan… 15 years at 6 percent because [the borrowers] are probably being charged 10 or 12 [percent].” ³

Bankrate and AARP take a more subdued stance, stating that “the interest rates on reverse mortgages vary by lender, but tend to be higher compared to a regular mortgage” ⁴ and “reverse mortgage interest rates tend to be a bit higher than rates for home equity loans or home equity lines of credit.” ⁵

Strange. I’ve been writing and speaking on the topic of home equity conversion for 16 years, and these criticisms do NOT reflect my experience.

I’ve generally taught that HECM interest rates will follow interest rates offered with a 30-year fixed-rate conforming mortgage.

Words matter, and so do numbers. So, I set out to find the truth.

Pulling numbers from multiple sources, I was able to compare prevailing interest rates over the last five years for HECMs, the 30-yr fixed-rate mortgage, and even estimated HELOC rates (based on Prime plus 0.75%). While all three rates were on a turbulent ride, HECMs came out the winner, as you can see here:

Product	Average (1/1/20 – 10/31/24)
HECM	4.889%
30-YR FRM	5.017%
HELOC (Est.)	6.309%

I’ll leave the analytics to the statisticians, but I believe it’s fair to say that HECMs tend to follow, and are strongly correlated to, the 30-year fixed-rate mortgage. In addition, they are significantly lower than HELOCs.

To learn more about reverse mortgages, please pick up a new (2025) copy of Understanding Reverse.

Dan Hultquist

1. Ramsey Solutions: Reverse Mortgages are SCAMS!!!! https://youtu.be/_c-WtWSnRzU.
2. Ramsey Solutions: Why should I NOT get a reverse mortgage? https://www.youtube.com/watch?v=v4-6aJmZDUY.
3. Ramsey Solutions: Navigating Reverse Mortgages: A Cautionary Tale for Seniors
4. Bankrate: https://www.bankrate.com/mortgages/reverse-mortgage-guide/#how-it-works  
5. AARP: https://www.aarp.org/money/personal-finance/reverse-mortgage-guide