source:
  type: guide
  id: hud-4000-1-ii-c-interest-rate-options
  authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Interest
    Rate Options (04/29/2024)
  description: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Interest
    Rate Options (04/29/2024).
  coverage_tier: operative
obligations:
- id: hud-4000-1-ii-c-interest-rate-options-full
  canonical_id: hud-4000-1-ii-c-interest-rate-options-full
  section: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Interest
    Rate Options (04/29/2024)
  type: do
  tags:
  - regulator-direct
  - fha
  - hud-handbook
  - corpus-expansion
  - tier-operative
  primary_source:
    tier: 1
    authority: FHA Single Family Housing Policy Handbook 4000.1, Part II — c. Interest
      Rate Options (04/29/2024)
    source_class: hud-handbook
    source_url: https://www.hud.gov/hud-partners/single-family-handbook-4000-1
    snapshot_id: 8c03836f77f317e1
    fetched_at: '2026-05-23T00:28:40Z'
    content_hash: sha256:411430f29b13f9b54a2ebb0e6f6e7087ecd2b90d0da22eb0c8c792eaa2d7d0df
    paragraph_quote: 'c. Interest Rate Options (04/29/2024) i. Definitions Fixed Rate
      refers to an interest rate that is fixed over the life of the HECM. Annually
      Adjustable Interest Rate refers to an interest rate that adjusts annually with
      a 2 percent annual cap and a 5 percent lifetime cap. Monthly Adjustable Interest
      Rate refers to an interest rate that adjusts monthly. The maximum lifetime Note
      rate may not be more than ten percent higher than the initial Note rate. ii.
      Standard The Mortgagee and Borrower must agree upon the interest rate. The Mortgagee
      may offer a fixed rate HECM and/or an adjustable rate HECM. The Mortgagee may
      only offer a monthly adjustable rate when the Mortgagee also offers an annually
      adjustable rate HECM. Periodic adjustments in the Note rate must correspond
      to the upward and downward change in the index, except that downward changes
      in the current index will not result in an index figure that is less than zero.
      The Mortgagee must provide the Borrower with a written explanation of any adjustable
      rate features of a HECM. The explanation must include the following items: •
      circumstances under which the rate may increase; • any limitations on the increase
      and the effect of an increase; and • Truth in Lending Act (TILA) pre-loan disclosures.'
  judgment: false
