Since the inception of the reverse mortgage program by HUD, it has offered only an adjustable interest rate. With the recent news stories spreading fear about the "danger" of adjustable rate mortgages, many seniors have understandably been more than a little gun-shy of the reverse mortgage with an adjustable rate.

But just in the past 6 months, a new fixed-rate reverse mortgage has been introduced. The rate is locked at the drawing of the final loan documents and remains fixed for the life of the loan. With rates as low as 5.5% this year this year, a fixed rate reverse mortgage sounds like an attractive option! But, as with most things, it comes with a few caveats.

The fixed rate reverse mortgage requires that the senior homeowner take the money that they qualify for as a lump sum. No credit line, term or tenure income payment is available. For those that have a large current mortgage to payoff, or for those who have plans for the money, this disadvantage is the sleeves out of their vest. But for this reverse mortgage for seniors who owe little or nothing on their homes and just want a little additional monthly spending money, the lump sum requirement has some real tradeoffs.

If they are required to take out all of the money at once, then interest will begin accruing on the full loan amount from day one. But with the adjustable rate reverse mortgage, they could get a monthly income check that is only added to the mortgage balance when the check is cashed. This would keep the balance of the reverse mortgage lower over the long run, allowing less interest to accrue and leaving the senior or their heir more equity in the home down the road.

The adjustable rate reverse mortgage also has the advantage of offering a larger amount of money to the senior homeowner. For example, a senior whose home is worth $220, 000 and who is in his early 70's, qualified for $10, 000 more under the adjustable rate versus the fixed rate reverse mortgage.

Many seniors do not care about having an adjustable interest rate. After all, the main danger of an adjustable rate mortgage, as exposed in the news stories, is that your monthly mortgage payment could rise quickly and beyond your means. Since a reverse mortgage has no monthly payment, this danger does not apply. The interest with go up and down, but other than seeing the changes on the monthly statement, the senior will not feel effects.

The fixed rate reverse mortgage may be a good idea for some seniors. For those who think that an adjustable rate will average out over time to be higher than the currently available fixed rate, it may be a good choice. Those who choose the fixed rate reverse mortgage must also have a good use for the lump sum of cash that they will receive, so that they do not needlessly accrue interest on their loan.