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Reverse Mortgage Glossary

Index

The index is a base interest rate that undergirds the initial interest rate (IIR) for a variable-rate HECM.

The fully-indexed IIR is composed of the index plus a margin charged by the lender. For example, if the index is 0.50% and the margin is 2.50%, then the fully-indexed IIR is 3.0%. If the index increases, then the IIR will increase as well.  

The most commonly used indices for the variable-rate HECM are the 1-Month LIBOR and the 1-Year LIBOR.

Note that there is no index for the fixed-rate HECM because the IIR is set for the life of the loan.

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