Investopedia.com states that the yield curve is “a line that plots yields (interest rates), of bonds having equal credit quality but differing maturity dates. The slope of the yield curve gives an idea of future interest rate changes and economic activity.”
Basically, the longer you are willing to let the government borrow your money, the more interest you should earn. A two-year bond should earn
less than a ten-year bond. However, when the yield curve inverts, it means that a two-year bond pays a higher interest rate (yield) than a ten-year bond.
So why does this matter to reverse mortgages?
The amount of money you can receive from the FHA insured reverse mortgage, called the Home Equity Conversion Mortgage (HECM), is based on the ten-year treasury index. The lower this index is, the more money you can receive, everything else being equal.
The fact that the ten-year bond is lower now than it was a month ago is a good thing if you are considering a reverse mortgage because you can qualify for more money with a lower ten-year bond rate.
Please check out this short video and feel free to contact me with any questions.