Fixed vs adjustable rate reverse mortgage

The fixed-rate HECM is a lump-sum product only (HUD ML 2014-11). Line-of-credit, tenure, term, and modified-combination payout options exist only on the adjustable-rate HECM (24 CFR §206.19), so the rate-type decision is also a decision about how the borrower wants to receive the money.

A HECM reverse mortgage comes in a fixed-rate version and an adjustable-rate version, and the rate type does more than set the interest rate. It limits which payout options the borrower can use. The fixed-rate HECM is a lump-sum product only; the line-of-credit, tenure, and term options exist only on the adjustable-rate HECM. So choosing a rate type is partly a choice about how the borrower wants to receive the money. The matrix compares the two, each cell sourced.

Last reviewed 2026-05-22

How do a fixed-rate and an adjustable-rate HECM compare side by side?

| Dimension | Fixed-rate HECM | Adjustable-rate HECM | |---|---|---| | How the rate behaves | Set at closing and fixed for the life of the loan (HUD ML 2014-11) | Moves with an index over the life of the loan, plus the lender's margin | | Index used | Not applicable; the rate does not move | 1-year Constant Maturity Treasury or 30-day SOFR, plus the lender's margin | | Payout options available | Lump sum only (HUD ML 2014-11) | Lump sum, line of credit, tenure, term, and the modified combinations (24 CFR §206.19) | | Credit-line growth | Not available; there is no line of credit on a fixed-rate HECM | The unused line grows at the note rate plus the 0.5% MIP rate (24 CFR §206.25) | | What interest accrues on | The full lump sum drawn at closing, from day one | The portion actually drawn; an undrawn line accrues no interest | | Mortgage insurance | 2% upfront FHA MIP + 0.5% annual MIP on the balance (24 CFR §206.105) | 2% upfront FHA MIP + 0.5% annual MIP on the balance (24 CFR §206.105) | | Rate risk | None; the rate is locked | The rate, and the loan balance's growth, move with the index | | Typical use case | A borrower who wants rate certainty and has a one-time use for the full amount | A borrower who wants a line of credit or monthly payments and can accept rate movement |

When does a fixed-rate HECM fit?

A fixed-rate HECM fits a borrower who values rate certainty and has a single, known use for the full proceeds at closing, most often paying off an existing mortgage. The rate cannot rise, so the borrower knows the terms for the life of the loan. The cost of that certainty is twofold. The fixed-rate HECM is lump-sum only, so the borrower gives up the line of credit, the tenure and term payment options, and the credit-line growth feature. And interest and MIP accrue on the entire balance from day one, even on funds the borrower has not yet spent.

When does an adjustable-rate HECM fit?

An adjustable-rate HECM fits a borrower who wants flexibility in how the money is received: a line of credit, monthly tenure or term payments, or a combination. Those options exist only on the adjustable-rate product. It also lets interest accrue only on what is actually drawn, and it carries the credit-line growth feature on any undrawn line. The trade is rate risk. The rate moves with the 1-year CMT or 30-day SOFR index plus the lender's margin, so the loan balance grows faster when rates rise and slower when they fall. For a borrower drawing gradually rather than all at once, that risk is usually acceptable against the flexibility gained.

How do you choose between a fixed-rate and an adjustable-rate HECM?

For many borrowers the payout decision settles the rate decision. A borrower who wants a line of credit or monthly payments has to take the adjustable-rate HECM, because the fixed-rate version cannot provide them. A borrower whose need is a one-time lump sum can then choose between the two on rate certainty alone. A HUD-approved counselor can model both against the borrower's plan.

How do you read the fixed-versus-adjustable comparison?

The row order is not a ranking. The payout-options row is usually decisive: if the borrower wants anything other than a lump sum, the adjustable-rate HECM is the only choice. If a lump sum is what is needed, the rate-risk row becomes the deciding factor. Model the draw in the reverse mortgage calculator, and read how rate type feeds the formula in the methodology page.

Related comparisons

Other reverse-mortgage comparisons that bear on the same decision:

• Lump sum vs line of credit
• Tenure vs term payments
• HECM vs jumbo reverse mortgage

The full set is on the comparisons hub.

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