Expected Interest Rate
The interest rate used to calculate HECM principal limit at origination, separate from the actual rate charged on the loan balance.
The expected interest rate is the rate used at HECM origination to determine how much principal limit a borrower can access. It is calculated from a published 10-year benchmark plus the lender's margin and is held constant for the principal limit calculation.
The expected interest rate is different from the actual note rate charged on the loan balance. On adjustable-rate HECMs, the note rate moves with a shorter benchmark plus the same margin, while the expected rate stays fixed at origination for purposes of the principal limit.
Higher expected interest rates generally reduce the principal limit available to a borrower, all else equal. This is why two homeowners with the same age and home value may see different HECM proceeds depending on when they apply.
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