Table of Contents
Written By: Elizabeth Skewes
Page Reviewed / Updated – 2/15/2024

What You Should Know About Reverse Mortgages

  • According to a HECM report from March 2022, over 5,000 reverse mortgage loans have already closed this year.
  • Reverse mortgages are also called Home Equity Conversion Mortgages, HECMs, or ‘Heckums’.
  • Reverse mortgages work in the opposite direction of a standard loan, providing payments to a homeowner from the bank based on the home’s equity.
  • These loans provide seniors with a lump sum, monthly payments, or a line of credit they can use for anything they need, including healthcare expenses and daily living costs.
  • Reverse mortgages are advantageous for certain homeowners but not for others, given the equity level of a home and the fees associated with obtaining the loan.

Between paying medical bills and covering costs for things like hearing and mobility aids, home healthcare, and senior housing, the simple process of aging costs the average American hundreds of thousands of dollars, and Medicare is unlikely to cover it all. However, the costs associated with aging are often vital to a senior’s quality of life, and for this reason, reverse mortgages can be extremely advantageous.

Financial products like reverse mortgages aid tens of thousands of retired Americans in paying out-of-pocket healthcare costs and other retirement expenses, and more than 5,000 FHA-secured reverse mortgages have already closed in 2022.

Read on for a deep dive into the ins and outs of reverse mortgages, including the top lenders, who should consider a reverse mortgage, and how to find a cost-effective reverse mortgage based on your individual needs.

Our Top Picks

Below, you’ll find the top eight HECM lenders of 2024. These reverse mortgage lenders have all demonstrated a commitment to ethics by maintaining membership with the NRMLA. Our lenders are listed in descending order, starting with those that can offer the best rates and guarantees, the broadest regional availability, and the most comprehensive customer support, which includes the option to apply from home and other technological aids. We have also included mention of lenders that can provide other financial products and services to borrowers who wish to repay an HECM by means other than selling a family home or who may require home shopping assistance after their loan is repaid by selling.

To learn how to find a cost-effective reverse mortgage and to find out what HECM borrowers can expect to pay in the long-term, scroll down to our HECM resource guide. Consumers interested in learning more about reverse mortgages, including their associated obligations, risks, and benefits, should visit FHA.gov to read the FHA’s reverse mortgage discussion guide, or visit HUD.gov to find out how to connect with a HUD counselor who can offer a complete HECM information session in person or over the phone.

The Best Reverse Mortgage Companies

Liberty Reverse Mortgage

Liberty Reverse Mortgage is exclusively a lender of FHA reverse mortgages and has remained in the top five reverse mortgage lenders by volume throughout 2022. Currently commanding over 7 percent of the reverse loan market, this lender has closed and serviced its share of reverse mortgages, including over 800 this year. 

Liberty is a member in good standing with the National Reverse Mortgage Lenders Association and this lender’s president is currently serving on the board of the NRMLA. Offering competitive price matching and cost guarantees as well as a highly transparent approach to lending, Liberty is a reliable option for HECM borrowers in most income brackets. Liberty Reverse Mortgage is currently licensed to originate and service loans in every state except for Utah, where third-party loan servicers affiliated with the company may still be available

Liberty Reverse Mortgage Overview

Price Guarantees, Rebates, or Discounts Offered

Like most reverse mortgage lenders discussed here, Liberty Reverse Mortgage does not charge a servicing fee to cover ongoing customer service tasks. Additionally, the company differentiates itself from other top lenders through:

  • Offering its Liberty Iron Clad Guarantee, which offers price matching for applicants who have found a better rate with another lender. If Liberty cannot match another lender’s offered rate, it can provide a $100 gift card as an incentive.
  • Providing $500 account credits to any borrower for whom it is not able to close a loan within 60 days or less

HECM Repayment Options

As a lender of exclusively FHA reverse mortgage products, Liberty Reverse Mortgage offers the following products:

  • Refinance HECM
  • Fixed-rate HECM
  • Adjustable-rate HECM
  • HECM for purchase

Online Application and Customer Service Technologies

HECM shoppers can find information on LibertyReverseMortgage.com that explains the entire application and closing process, as well as what to expect from a HUD counseling session.

Liberty offers an easy, five-step loan application process that can be completed from home and provides customer support from a dedicated team of specialists throughout the entire process. The company promises that all applicants will speak with a loan professional who is specifically dedicated to servicing their file, and clients will always be able to reach this person during normal business hours (PST).

Locations and Availability

This lender employs over 100 licensed advisors across the country, offering physical office locations in many areas where consumers can meet with a loan officer in person if they wish. Liberty Reverse Mortgage currently offers loan origination and servicing in every state except Utah, though there may be affiliated third-party brokers offering Liberty’s products in that state.

To find a loan officer near you, visit LibertyReverseMortgage.com and enter your information to receive a loan estimate and to be contacted by a representative, or call (866) 751-2606.


All Reverse Mortgage

All Reverse Mortgage has maintained its position as the twelfth-largest reverse mortgage lender by volume throughout 2022, currently commanding a 1.28 percent market share with more than 140 reverse mortgages closed as of February this year. This lender boasts an A+ rating with the Better Business Bureau and has been rated five stars on ConsumersAdvocate.org, Consumer Affairs, Yelp, and Google. As a finalist for the Better Business Bureau’s 2021 Torch Awards for Ethics, the company was recognized for its “exceptional dedication to integrity and ethical business practices.”

Specializing in reverse mortgages, the company is known for offering a wide range of products including three different HECMs and two jumbo reverse mortgage options. With this variety, you’ll likely find a reverse mortgage that fits your personal financial needs. All Reverse Mortgage currently lends in 15 states and is a member in good standing with the National Reverse Mortgage Lenders Association, which certifies lending institutions that uphold a nationally recognized code of ethics.

All Reverse Mortgage Overview

Price Guarantees, Rebates, or Discounts Offered

One Reverse Mortgage places a high value on customer satisfaction in everything it does, including the borrower-favorites highlighted below:

  • Embraces transparency with a free online calculator that allows borrowers to look at the actual rate and fee costs in real time for their area
  • Provides one of the lowest interest rates of HECM lenders, according to HUD data
  • May offer to waive or reduce the origination fee for certain reverse mortgage products

HECM Repayment Options

Although All Reverse Mortgage provides primarily HECM reverse mortgages, it offers three different options:

  • Adjustable-rate HECM
  • Fixed-rate HECM
  • HECM for purchase

All Reverse Mortgage HECMs offer: 

  • $0 monthly payment option
  • No minimum credit score
  • No minimum reserves
  • Non-recourse loan

Additionally, All Reverse Mortgage provides two types of Jumbo Reverse Mortgages: fixed-rate and adjustable-rate. All Jumbo Reverse Mortgages offer:

  • $4,000,000 lending limit
  • Lump-sum fixed rate payment option
  • Support for homes up to $10 million in value

Online Application and Customer Service Technologies

All Reverse Mortgage closes and services loans without the need for borrowers to ever visit an office. The entire application process can be completed from the comfort of your home with the trusted guidance of a licensed loan specialist available both online and over the phone.

The company specializes in providing easy-to-access information about reverse mortgages on its website. An online menu offers simple explanations of how reverse mortgages work and their pros and cons, in addition to a host of helpful loan tools including:

  • Reverse mortgage calculator
  • Today’s reverse mortgage rates
  • Reverse mortgage counseling locator
  • Top reverse mortgage lender comparisons
  • HECM program comparisons
  • Q&A blog with the company’s CEO Michael G. Branson, who has over 40 years of experience in the mortgage banking industry

Locations and Availability

Although All Reverse Mortgage has a corporate office located in Orange, California, it primarily conducts business online and over the phone. Information can be found by calling 800-565-1722, or by submitting some basic information through the company’s free instant quote generator. 

Currently, the only 15 states where All Reverse Mortgage offers HECM loan products are:

  • Arizona
  • California
  • Oregon
  • Washington
  • Colorado
  • Texas
  • Georgia
  • Alabama
  • Florida
  • Tennessee
  • South Carolina
  • North Carolina
  • Virginia
  • Pennsylvania
  • New Jersey

Longbridge Financial

Longbridge Financial entered February of 2022 with an 8.2 percent market share among direct reverse mortgage lenders and nearly 974 such loans closed this year. This lender is a member in good standing with the National Reverse Mortgage Lenders Association, and Longbridge’s commitment to transparency is also evidenced by the plain-spoken and broad array of informational articles on their website.

This lender’s client guarantee, the Longbridge Commitment, provides various cost-saving and confidence-boosting features for reverse mortgage shoppers. Longbridge provides perks like free identity theft protection and a guarantee to close loans quickly — within 45 days or less. Comparison shoppers will also find the Longbridge Financial website particularly informative and transparent.

Longbridge Financial Overview

Price Guarantees, Rebates, or Discounts Offered

Longbridge does not charge monthly servicing fees for ongoing administrative and customer service work. Additionally, it is one of the few reverse lenders that pledges never to sell a borrower’s contract on the securities market. This ensures that clients will never have to worry about servicing fees being charged by other institutions.

HECM Repayment Options

Longbridge is exclusively a lender of reverse mortgages, including a jumbo private reverse mortgage for owners of high-value homes.

Products currently provided by Longbridge Financial include:

  • Fixed and adjustable HECMs
  • HECMs for purchase
  • Jumbo (non-FHA) reverse mortgages for high-value homes
  • Refinance HECMs

Online Application and Customer Service Technologies

Longbridge Financial provides current and prospective clients with a highly comprehensive website where they can contact the lender, get a free estimate, and learn about what to expect from the reverse mortgage counseling and application processes. Applications can be completed over the phone and loan closing can be done in the borrower’s home.

Locations and Availability

Longbridge Financial is headquartered in Mahwah, NJ, and has a large network of licensed brokers available to help applicants and current borrowers with loan origination and servicing tasks. To find a dealer nearest you, call Longbridge at (855) 523-4326 or go online to Longbridge-Financial.com to request to be contacted by a representative.


American Advisors Group (AAG)

AAG is a well-established lending institution that has closed more reverse mortgages than any other lender through every month of this year. With an impressive 29.01 percent market share among other reverse lenders for the month of February, AAG has provided about 3,100 reverse mortgages to borrowers all over the country. This lender is also a member of the National Reverse Mortgage Lenders Association, which requires member institutions to uphold a nationally standardized code of ethics.

The benefits of an AAG reverse mortgage come mainly from this lender’s sheer size and proliferation of the financial markets across the country. American Advisors Group currently offers reverse mortgages for residents of every state and has licensed loan officers available in most areas as well as main branch locations in California, Texas, Georgia, Hawaii, and New York. If AAG’s 97 percent customer satisfaction surveys are any indication, this lender has leveraged its ample reverse mortgage servicing experience to provide a time-tested customer support environment.

American Advisors Group Overview

Price Guarantees, Rebates, or Discounts Offered

While servicing fees such as document filing, loan management, and other administrative tasks may be charged by some lenders to cover long-term customer service costs, AAG does not charge a servicing fee throughout the life of an HECM loan.

HECM Repayment Options

For borrowers or their heirs who wish to repay their HECM loan by means other than making monthly payments or selling their home, AAG provides multiple financial products under one roof. 

Furthermore, in cases where a borrower does wish to sell their home to repay their HECM, this lender offers the AAG Residential Services program, which helps older adults find a new home that better suits their needs by coordinating with real estate professionals and providing guidance and support throughout the home shopping and buying process. 

American Advisors Group provides the following loan repayment options:

  • HECM reverse mortgages
  • Refinance HECMs
  • Jumbo (non-FHA) reverse mortgages
  • Refinance loans

Online Application and Customer Service Technologies

Reverse mortgages with AAG can be applied for online or over the phone without the need to see a loan officer face-to-face. However, the FHA does recommend that reverse mortgage borrowers attend their loan closings to ensure that they understand exactly what they are signing. Additonally borrowers have high-quality informational resources available online at AAG.com, including a reverse mortgage estimate calculator

Locations and Availability

AAG is one of the only top lenders doing business in every American state. Being a long-standing and more traditional lender, AAG has licensed loan officers established in most areas, as well as main branch locations in New York, California, Georgia, Texas, and Hawaii. To find a loan officer near you, visit AAG.com, or call (866) 948-0003.


Quontic Bank

Quontic Bank is a traditional banking institution offering a broad range of financial products and services, including HECM reverse mortgages. Though HECMs are not Quontic’s featured product (it has closed only about 8 reverse mortgages this year), this lender was voted one of the country’s top 200 healthiest banks in 2016 and has a long list of other accolades. Quontic Bank is also a member in good standing with the National Reverse Mortgage Lenders Association.

Though there are other lenders not included here who have closed more reverse mortgage loans in 2022 than Quontic, none of them can offer the nationwide coverage that Quontic Bank can provide. Quontic is licensed to originate HECM reverse mortgages in all 50 states, and it has well-established physical locations and reverse mortgage brokers in multiple states across the country. As this is a traditional bank, Quontic can offer reverse mortgage borrowers a long list of options for refinancing or otherwise repaying their HECM without selling their home and provides a highly sophisticated online banking and application experience.

Quontic Bank Overview

Price Guarantees, Rebates, or Discounts Offered

Because Quontic Bank is not primarily an HECM reverse mortgage lender, this bank does not currently advertise any special savings or price matching guarantees for prospective borrowers. However, while some lenders may charge a servicing fee of up to $35 per month to cover administrative and customer service tasks over the life of a reverse loan, Quontic Bank does not charge a servicing fee. This lender may, however, include their charges for these costs as part of a borrower’s marginal interest rate, in which case, the cost would amount to a fraction of a percentage point.

HECM Repayment Options

Quontic Bank is well-established in consumer banking and lending, and offers possibly our widest range of financial solutions to borrowers and their heirs in the event that they wish to repay an HECM without selling their home.

Quontic Bank currently offers the following products:

  • Traditional mortgages
  • Refinancing
  • Refinance HECMs
  • Portfolio loans
  • ‘Lite Doc’ loans
  • Foreign national loans
  • FHA loans
  • VA loans
  • Personal banking

Online Application and Customer Service Technologies

Reverse mortgage borrowers with Quontic Bank have the benefit of Quontic’s online customer service ecosystem, which features portals for personal banking and offers a large database of banking and reverse mortgage borrowing information. Applications with this lender can be initiated online and completed over the phone, and closing meetings can be held in a borrower’s home at their request.

Locations and Availability

While HECM reverse mortgages from Quontic Bank are available in all 50 states, this lender has main branch locations only in New York, Georgia, and Florida. Interested reverse mortgage shoppers can also find products funded by Quontic Bank through third-party brokers, who are located in most states across the country. To find out more or to receive a reverse mortgage estimate from Quontic, call (800) 908-6600 or contact them online here.


Fairway Independent Mortgage

Fairway Independent Mortgage has been a top lender in 2022 with a nearly 4 percent market share. A member in good standing with the National Reverse Mortgage Lenders Association, Fairway has become popular among reverse borrowers largely due to its comprehensive mobile and online tools as well as its expansive list of office locations across the country.

While this lender does not currently advertise any price matching guarantees or special deals or rebates for new clients, Fairway has become a popular HECM lender and may be likely to offer competitive rates for HECM reverse mortgages. However, rates are not disclosed until applicants initiate direct contact with the lender. Part of the driving force behind Fairway Independent’s popularity in HECM lending may be the technological tools it offers, which include a mobile app where borrowers can complete a reverse mortgage application and regionally-specific web portals that connect borrowers with their loan officers.

Fairway Independent Mortgage Overview

Price Guarantees, Rebates, or Discounts Offered

For some borrowers, Fairway Independent Mortgage may originate and service HECM reverse mortgages without ever adding the cost of a monthly service fee. However, Fairway does sometimes sell reverse mortgage notes to other loan servicers who will provide loan servicing labor in their stead, and these servicers may charge a monthly fee of up to $35. 

Though Fairway does sometimes sell the servicing rights to HECMs contracts to other servicing institutions, Fairway Independent Mortgage demonstrates a high degree of transparency where its loan servicing practices are concerned.

HECM Repayment Options

Fairway Independent Mortgage offers multiple loan options besides HECMs that borrowers or their heirs can use to repay a reverse mortgage if they do not wish to sell the reverse mortgaged home. Among Fairway’s financial products are:

  • Mortgage refinances
  • HECM refinances
  • Renovation loans
  • Jumbo (non-FHA) reverse mortgages
  • VA and USDA loans

Online Application and Customer Service Technologies

Fairway Independent Mortgage has an especially robust digital customer service system. Fairway loan officers have their own web portals where borrowers can get information that is relevant to borrowers in their state, and where they can easily contact a dedicated team of professionals who serve residents of a specific area. This lender also has a very comprehensive app, called the FairwayNOW app, that allows borrowers to apply for a loan and receive updates from their smartphone. Applications can be completed using these tools, including digital document downloads and signing.

Locations and Availability

This lender has more physical office locations than many of the other top lenders. Fairway originates and services loans in most states, currently excluding residents of Alaska and West Virginia. To find a loan officer nearest you, call (866) 912-4800 or contact Fairway’s customer service team at FairwayIndependentMC.com.


Finance of America Reverse

Finance of America’s reverse mortgage division, Finance of America Reverse, has been a leader in reverse mortgage closings throughout 2022. FAR has become the sixth-largest lender of HECM reverse mortgages by volume, with a 6.73 percent market share this February and 787 reverse mortgages closed this year.

Currently a member in good standing with the National Reverse Mortgage Lenders Association, FAR provides reverse mortgages and a broad range of other financial instruments in every state. While Finance of America Reverse does not advertise any sort of price matching or cost guarantees to consumers and currently cannot offer a completely remote application process, their history as a comprehensive lending institution and FAR’s ample consumer resources have helped it retain its position as a top reverse mortgage lender.

Finance of America Reverse Overview

Price Guarantees, Rebates, or Discounts Offered

At present, FAR does not advertise any price matching or cost guarantees for prospective borrowers, and may charge a servicing fee of up to $35 per month for some borrowers. This popular lender may offer competitive interest rates, and loan applicants who wish to find out more about what Finance of America Reverse can offer them should contact FAR for an estimate.

HECM Repayment Options

Finance of America is the parent corporation for Finance of America Reverse, Finance of America Mortgage, and Finance of America Commercial. The benefit of banking with an institution that can provide multiple types of funding is that heirs and borrowers have the option to refinance or pay off their HECM note using other financial products from a lender that they already know and trust. By offering a range of loan options, lenders like Finance of America make it easier to avoid selling a reverse mortgaged home once the loan comes due.

Products available from Finance of America include:

  • HECM reverse mortgages
  • HECM refinance
  • Home loans
  • Commercial loans
  • Student loans

Online Application and Customer Service Technologies

With an incredibly comprehensive website full of consumer information and estimate calculators, Finance of America Reverse offers a supportive online environment for comparison shoppers. However, the application process with FAR must be at least partially completed with the use of physical document signing, which may require applicants to resort to snail mail or in-person visits to receive their final reverse mortgage estimate from FAR.

Locations and Availability

Finance of America Reverse has main branch locations in San Diego, New York, Tulsa, and Indianapolis. Prospective borrowers can also find licensed loan specialists from FAR across the country. To find a FAR loan officer near you, visit FAReverse.com and request to be contacted, or call (855) 421-4745. Finance of America Reverse is currently licensed to do business in every state.


Mutual of Omaha Mortgage

Mutual of Omaha Mortgage has maintained a top position by closing almost 1,000 reverse loans in 2022, and it currently holds an 8.5 percent market share among reverse mortgage lenders.

Mutual of Omaha’s well-established mortgage program provides borrowers with an array of financial options to repay an HECM loan, as well as a built-in customer care environment. Mutual of Omaha Mortgage is a member in good standing with the National Reverse Mortgage Lenders Association and currently offers reverse mortgage loan servicing in all but two states.

Mutual of Omaha Mortgage Overview

Price Guarantees, Rebates, or Discounts Offered

Mutual of Omaha Mortgage does not currently advertise any price matching programs or cost guarantees to prospective borrowers, and unlike most modern reverse mortgage lenders, Mutual of Omaha Mortgage may charge borrowers monthly servicing fees, which can be paid using part of the loan proceeds. To find out if the company can offer competitive fees and interest rates, reverse mortgage shoppers should contact Mutual of Omaha Mortgage for an estimate.

HECM Repayment Options

Mutual of Omaha Mortgage is exclusively a lender of FHA reverse mortgages (HECMs), and borrowers have the benefit of flexible repayment options.

Mutual of Omaha Mortgage offers the following financial products:

  • Retirement housing loans
  • Refinance HECMs
  • Jumbo reverse mortgages for high-value homes (non-FHA)
  • Conventional mortgages and refinancing
  • USDA and VA loans

Online Application and Customer Service Technologies

This lender boasts an established online ecosystem for potential borrowers and current clients, including a simple contact form to quickly receive information. Mutual of Omaha Mortgage applications can be completed online or over the phone with a licensed professional, and notaries can be sent to borrowers’ homes to facilitate the closing process. 

Locations and Availability

Mutual of Omaha Mortgage has third-party brokers and loan officers located across the country in most states. This lender currently originates and services reverse mortgages in every state except West Virginia and New York. To find a location near you, call (877) 721-3847 or get in touch online

What Is a Reverse Mortgage?

Reverse Mortgages are a type of mortgage loan that works in reverse of a typical one. Instead of making a monthly payment to the bank, the bank pays the homeowner a monthly fee, a lump sum, or a line of credit, using the borrower’s home equity to fund the loan. The principal balance of the loan doesn’t have to be paid until the end of the contract or when the homeowner leaves the house.

Reverse Mortgages are only available to those age 62 and older, making them a great source of extra, tax-free income for seniors on a tight budget. The loans are government-secured and regulated by the Fair Housing Administration (FHA) and the Department of Housing and Urban Development (HUD). They are also sometimes referred to as HECMs, ‘Heckums’, or Home Equity Conversion Mortgages.

Steps to Take to Get a Reverse Mortgage

The process of obtaining a HECM can be a bit complicated, but taking the right steps, a senior homeowner can greatly benefit from one of these loans. Follow these steps to find, apply for, and obtain a reverse mortgage:

Step 1 – Research HECM Lenders

It’s important to shop around for your reverse mortgage loan provider. There are many companies that offer HECM loans, but each company can offer different interest rates, special offers, fee discounts, and more. Be sure to look over our top 9 reverse mortgage lenders to see what each one offers and why we believe they are the best available.

Step 2 – Apply for the Loan

Once you have chosen a lender, the application process begins. Every lender will have a slightly different process but the application stage will generally be the same for each company:

  • Visit the lender’s website and begin an application
  • Provide your contact information
  • Upload the requested financial documents
  • E-sign the application and submit

Once an application has been submitted, a representative from the bank will contact you in the coming days to let you know the status. They may need additional documentation to continue the application process. You can also apply over the phone and have your questions answered as you go.

Step 3 – Receive Reverse Mortgage Counseling

Before the application can be approved, the homeowner must complete reverse mortgage counseling with a certified counselor. This involves taking a course in person or over the phone, going over the details of how a reverse mortgage works. The course will detail the applicant’s responsibilities if their application is approved.

Reverse mortgage counseling can be completed in about one hour. The session typically costs $125 to $175 although many organizations can offer it for free through grants they receive. Once completed, the applicant will receive a certificate to add to their reverse mortgage application.

Step 4 – Get a Home Appraisal

Before a HECM loan can be processed, the homeowner must have an FHA-approved appraiser carry out an appraisal of the home. The appraiser will determine the true value of the home based on FHA standards. This provides the lender with the most accurate information in regards to the value of the home and the equity the owner has available.

Step 5 – Go Through Underwriting

The final step before closing on a reverse mortgage loan is the underwriting process. At this point, the lender will:

  • Research the title and obtain title insurance
  • See if there are any unpaid liens on the house
  • See if there are any bankruptcies on the homeowner
  • Clear up any other issues that may need clarification

Once everything is clear, the loan application can go into closing.

Step 6 – Close on the Loan

At this point, the lender and homeowner schedule a date to meet with an attorney to go over the details of the loan. This gives the homeowner the chance to ask any questions and make sure that the rates and dollar amounts match their expectations. Once the paperwork is signed, the homeowner will have a three-day grace period where they can cancel the entire deal if anything is not as they expected.

Once the loan has been signed and the grace period has ended, the agreed-upon payments will be made to the homeowner.

Pros and Cons of a Reverse Mortgage

A reverse mortgage may be a great option for some, while not providing much value for others. Below are a few pros and cons of reverse mortgages to consider before trying to obtain one.

Pros Cons
Provides extra retirement income for those who have significant home equity but do not have much in savings or investments. Not useful for those looking for short-term financing or income, as the fees involved can outweigh the benefit.
Allows you to cash in on current home equity in case you believe the house value will drop in the future. Many upfront costs and closing costs can take a sizable piece of equity away.
Can be used to pay off an existing mortgage, wiping out a sizable monthly mortgage bill when money is tight later in life. Family members may not be able to keep the home after the owner dies, as the rest of the mortgage must be paid off at that point.
Perfect for those who plan to stay in their home for the long term—the longer the owner stays, the more worthwhile the loan will be.
The money is considered a loan and not income, making it tax-free.

How to Find a Cost-Effective Reverse Mortgage

The factors most responsible for determining a borrower’s total reverse mortgage costs are the type of HECM they choose, the interest rate they are offered, and their total loan amount, which is based on a borrower’s home value among other considerations. 

Finding the best interest rate requires that consumers receive reverse mortgage estimates directly from multiple lenders. In doing so, it’s best that reverse mortgage shoppers begin fielding offers with a clear understanding of what costs and fees they are likely to face and what payout and rate structures would best suit their needs.

In addition to reviewing our top lenders above, we recommend using the following information to find your best reverse mortgage option.

Understand the Costs and Fees

Closing Costs

Closing costs are also referred to as third-party fees, and they involve paying for the many services that are required to close an HECM loan. Closing costs vary by lender, but for each lender, third-party fees are also likely to vary by the location of the borrower’s property and the size of their loan. According to the NRMLA, these costs are likely to run between $1,000 and $2,000 total.

The following are third-party closing costs that HECM borrowers are likely to pay and their average price ranges.

  • Credit Reporting Fee: $20 to $50 (verifies federal tax liens and other debts) 
  • Flood Certification Fee: $20 (demonstrates that property is not on a federally designated flood plain) 
  • Escrow/Settlement/Closing Fee: $150 to $800 (includes a title search and other required closing services) 
  • Document Preparation Fee: $75 to $150 (for preparation of closing documents such as the mortgage note)  
  • Recording Fee: $50 to $500 (to record a mortgage with the local County Recorder’s Office) 
  • Courier Fee: $50 or less (for overnight document delivery before closing) 
  • Title Insurance: Varies by loan amount with larger loans costing more (insurance protects lender or buyer from property ownership disputes) 
  • Pest Inspection: $100 or less (to check primarily for wood-destroying organisms) 
  • Survey Fee: $250 or less (to determine property boundaries and check for encroachment by surrounding properties) 

Appraisal Fees

Appraisal fees are generally paid up front in cash before a loan is closed. Homes must be independently appraised before an HECM can be settled, and if the appraisal exposes basic repairs that must be made to protect the home’s longevity, a reappraisal must be done after the repairs are completed.

Fees for initial appraisals are likely to cost close to the average of $450, and reappraisal fees generally cost between $100 and $150.

Loan Origination Fee

For HECM borrowers, this fee can be rolled into the principal amount of the loan and paid at the end of the loan’s term after gaining annually compounded interest, though HECMs for purchase require the origination fee to be paid at closing. This fee is particular to each lender and is generally not subject to regional variation, though a borrower’s origination fees may vary based on the size of their loan, their offered interest rate, and their financial resources. 

Origination fees are capped by the FHA and are primarily based on a property’s value, though some lenders may charge less than the federal cap. For homes valued at $125,000 or less, the fee is capped at a flat $2,500. Homes valued at more than $125,000 carry a maximum 2 percent fee on the first $200,000 of value and 1 percent on the remaining value beyond $200,000. The maximum origination fee that any HECM borrower can pay is $6,000.

  • Homes valued at $125,000 or less: Max $2,500
  • Homes valued at $150,000: Max $3,000
  • Homes valued at $175,000: Max $3,500
  • Homes valued at $200,000: Max $4,000
  • Homes valued at $250,000: Max $4,500
  • Homes valued at $300,000: Max $5,000
  • Homes valued at $350,000: Max $5,500
  • Homes valued at $400,000 or more: Max $6,000

Mortgage Insurance Fee

Mortgage insurance fees and premiums are paid to the FHA to protect buyers from bank failure or a loss of home value that could make a reverse loan difficult to repay by selling. The mortgage insurance fee is paid up-front when the loan closes. It costs 2 percent of the home’s total value or 2 percent of the maximum HECM loan amount cap of $726,525 for borrowers with high-value homes. Mortgage insurance fees and premiums do not gain interest.

  • Homes valued at $100,000: Fee of $2,000
  • Homes valued at $150,000: Fee of $3,000
  • Homes valued at $175,000: Fee of $3,500
  • Homes valued at $200,000: Fee of $4,000
  • Homes valued at $250,000: Fee of $5,000
  • Homes valued at $350,000: Fee of $7,000
  • Homes valued at $425,000: Fee of $8,500
  • Homes valued at $500,000: Fee of $10,000
  • Homes value at $600,000: Fee of $12,000
  • Homes valued at more than $726,525: Max fee of $14,530.50

Mortgage Insurance Premiums

MIPs are much more forgiving than initial mortgage insurance fees and are no longer charged once an HECM reaches five years of maturity or the outstanding balance reaches 78 percent of the borrower’s total property value, whichever occurs first. Mortgage insurance premiums cost 0.5 percent of the outstanding loan balance and are assessed and charged on an annual basis, though they are not paid until the loan contract is at an end. The 0.5 percent cost is based on the outstanding loan amount rather than the full amount of the loan or the home’s value. This means that if, rather than choosing a lump sum, a borrower takes their loan payments more gradually, they may ultimately pay less for their mortgage insurance. MIPs do not accrue interest.

Servicing Fees

Servicing fees are charged by some lenders for their ongoing assistance with an HECM loan, which can involve a lot of administrative tasks and personal customer support. However, most lenders have phased out servicing fees and now include servicing costs as part of the borrower’s interest margin. This means that servicing costs can vary on a case-by-case basis, though they are not likely to represent a significant cost to most borrowers.

While most lenders’ servicing fees are levied in the form of a slight increase in interest rate, some lenders still cover servicing costs using a monthly fee that can sometimes be “set aside” by reserving an interest-free portion of the loan with which to pay these fees when the loan reaches maturity. 

Set-aside reserves for monthly service fees are calculated based on the amount of the loan principal and the borrower’s estimated life expectancy. Monthly service fees can range from $25 to $35 and are capped by the FHA. For borrowers of adjustable-rate HECMs, there are options to have interest adjusted on either a monthly or yearly basis, and the FHA caps servicing fees for yearly adjusted HECMs at $30 and at $35 for monthly adjusted HECMs. 

Interest 

HECM borrowers pay interest on the portion of their loan principal which they have withdrawn from year to year. Interest rates for HECMs are compounded annually, so when borrowers of HECMs pay off their loan at the end of their contract’s term, they will ultimately pay interest on both their principal loan amount and their interest charges to date. Interest rates for HECMs are a percentage determined by banking regulations and practices as well as the borrower’s personal circumstances. Rates are currently likely to be slightly higher with fixed-rate HECMs than the starting rate offered to adjustable HECM borrowers. However, interest rates for adjustable-rate HECMs are likely to be less stable and will probably rise by a few percentage points within the next five to ten years. 

Interest rates for HECMs are composed of two parts: The index-linked rate and the borrower’s assessed margin. The two combined are called the borrower’s IIR, or initial interest rate. Though this rate does fluctuate for adjustable-rate products, HECM interest rates are capped by the FHA to never exceed 5 percent over a borrower’s initial interest rate.

The marginal portion of a borrower’s IIR, sometimes referred to as the lender’s interest rate, does not fluctuate throughout the life of an HECM loan. It is determined using a complex mix of factors, including the age of the youngest co-borrower, the age of the non-borrowing spouse, credit history and the value of the home.

The index-linked portion of an adjustable HECM’s interest rate is most often based on the LIBOR index (London Interbank Offered Rate), which fluctuates in response to commonly accepted banking practices and economic forces, such as rate hikes imposed by the Federal Reserve. This may change in the near future, as there have been talks of switching to a more modernized index for reverse mortgage interest rates.

For a detailed breakdown of how HECM interest rates are calculated, NRMLAOnline.org offers a very specific PDF on the matter. To calculate your likely interest rate, the NRMLA offers an HECM calculator which bases its predictions on current market averages and historical trends.

About Interest Rate Trends

About Interest Rate Trends Since the spring of 1989, home equity interest rates have been on a largely downward trajectory. LIBOR rates bottomed out in 2009 after the housing and stock market crashes took their toll, but in the first quarter of 2016, rates began a slow climb upward toward the 3 percent mark. However, the pandemic caused that trend to reverse and they have fallen steadily from the 2.4 percent level reached in June 2019. The one-month LIBOR index as of 12/31/2020 sits at .15 percent, down from 1.76 percent a year earlier. Current interest rate predictions are uncertain, as the outcomes of trade disputes among major world powers and the resolution of the issues caused by the pandemic will be key factors in whether and how much rates rise from current levels. However, the marginal interest rates that lenders offer to their clients are based on borrowers’ personal circumstances, so this portion of a borrower’s interest rate is not market-linked and will never fluctuate. 

How Fixed and Adjustable Rates Affect Your Costs

Fixed-Rate HECMs: Lower Available Loan Amounts and Greater Security

A fixed-rate HECM offers an attractive option for borrowers whose stated financial goal for their reverse mortgage involves addressing immediate costs, such as medical bills or a mortgage that they wish to remove from their monthly outlay. Fixed-rate reverse mortgages offer only one payment option for borrowers: A lump sum paid at closing. 

What this means is that fixed-rate HECM borrowers must take a single payment from their reverse mortgage loan with no potential for further payments as their reverse contract continues through the years. The catch with fixed-rate HECMs is that the FHA has instituted a first-year payment limit in order to promote long-term saving among retirees. Holders of fixed-rate notes not only receive their maximum payment up front at closing; they will never receive any more than the FHA’s first-year payment limit of 58 percent of their loan proceeds. 

Fixed-rate HECM borrowers receive only 58 percent of their available loan and they are charged interest on only the used portion of their loan for the life of their contract. However, the mortgage insurance premiums that HECM borrowers must pay for the first five years of their contract are equal to 0.5 percent of the outstanding loan amount, so borrowers who plan to take the full 58 percent of their loan as their lump sum payment will pay mortgage insurance premiums on that sizeable chunk of their reverse loan for the five years in which mortgage insurance premiums are charged.

Opting for a fixed rate product may provide a little leeway where the first-year limit is concerned for HECM borrowers who wish to pay off a significant remaining mortgage balance on their home. If the existing mortgage balance to be paid is equal to 58 percent of the reverse mortgage proceeds these borrowers are offered, they will be able to take up to 10 percent more than the 58 percent first-year limit as a provision for personal use. However, this extra 10 percent must also be taken as part of the lump sum given at closing and will factor into how much these borrowers will pay in mortgage insurance premiums and interest.

The good news for fixed-rate borrowers is that they will be likely to pay less interest over the long haul than adjustable-rate borrowers, who can be charged up to 5 percent more than their initial interest rate as markets fluctuate. Furthermore, unlike adjustable rate borrowers who may take up to 100 percent of their available loan amount to cover personal costs and fees, fixed-rate HECM borrowers will have up to 42 percent of their loan proceeds remaining when their contract is matured. This enables fixed rate borrowers to pay their interest charges from their remaining loan proceeds, thus running less risk of having their home’s equity cannibalized by a reverse mortgage.

Adjustable-Rate HECMs: Higher Available Loan Amounts and Greater Flexibility

Adjustable-rate HECMs provide multiple payment options to borrowers, including a line of credit reserve that can regain interest over time and offer voluntary payments at the time of a borrower’s choosing. But adjustable-rate products also offer borrowers the option to use up all of their reverse mortgage loan proceeds so that they end up owing fees and interest on top of their loan amount when it’s time to pay off their note.

Though FHA mortgage insurance protects homeowners from ever owing more on their matured HECM than the fair market value of their home, there is still a greater risk with adjustable-rate products of losing both the equity and potential profits from a home after its eventual sale. 

Homeowners who choose the adjustable-rate HECM option can utilize the total of their loan proceeds to cover their personal expenses and their rolled-in lender’s fees. But when the interest on a reverse mortgage comes due at the loan’s maturity date, if the total loan has already been used, interest must be paid out of the home’s roughly 30 to 70 percent of remaining (untapped) equity. For homeowners who use the total of their HECM loan proceeds, after paying interest at the loan’s maturity date, their remaining equity will have been at least partly cannibalized by interest and fees. 

However, the perks of an adjustable-rate HECM can be extremely rewarding to the retirement portfolio of borrowers who can responsibly utilize their proceeds. For example, a homeowner who opts to take their payments from a home equity line of credit will actually gain interest on that amount at the same interest rate that they are charged on used loan proceeds. Aside from a line of credit, there are multiple payment options for adjustable-rate borrowers.

  • Line of credit (proceeds taken at will)
  • Tenured monthly payments (taken throughout the life of the loan)
  • Term monthly payments (taken for a pre-specified length of time)
  • Modified tenure payments (combination of line of credit and ongoing monthly payments)
  • Modified term payments (combination of line of credit and temporary monthly payments)

Monthly vs Yearly Adjustment

Interest rates for most adjustable-rate HECMs fluctuate with the LIBOR index and can be adjusted on a monthly or yearly basis at the borrower’s discretion. One key difference between monthly and yearly adjusted rates is that monthly assessed rates tend to be slightly lower. However, the difference can be mitigated by the fact that lenders’ servicing costs for monthly adjusting borrowers (usually included in the borrower’s marginal interest rate) tend to be slightly higher due to the extra work that is required to service these loans. 

The main difference between monthly and yearly adjustment is that, for borrowers who choose to have their interest rate adjusted on a yearly basis, their rate is capped during each 12-month period over the life of their loan. 

What this means is that borrowers of adjustable-rate HECMs have a guarantee in place that their starting interest rate will never grow by more than 2 percent within a 12-month period. However, this cap applies to both rising and falling interest rates, so if yearly adjustable HECM borrowers see interest rates fall by more than 2 percent in any given year, their interest rate will only come down by a maximum of 2 percent, and it can take up to 12 months for the difference to take effect for them. For this reason, monthly adjusted HECMs are more popular in times when interest rates are expected to fall, as borrowers of these products can capitalize on rate cuts more effectively. Both yearly and monthly adjustable interest rates have a lifetime cap of 5 percent, so HECM borrowers’ rates will never exceed their starting rate by more than 5 percent over the life of their HECM loan.

Understand Long-Term HECM Costs

Maintaining some measure of control over reverse mortgage costs can be very complicated. These loans are long-term and highly conditional, but we believe that the following cost accrual demonstrations and hypothetical borrower scenarios may help consumers gain a better understanding of the total costs they are likely to pay, helping them to borrow responsibly and plan their retirement.

The largest expenses reverse mortgage borrowers are likely to pay will be their total interest charge, their initial mortgage insurance fee and their origination fee. Servicing fees can be significant as well, but because some borrowers are charged monthly for servicing fees while others are charged for servicing with the addition of interest assessed by lenders, we cannot provide a reliable calculation of servicing costs here. We’ll discuss the long-term impact of mortgage insurance and origination fees in some detail below, but first, we’ll demonstrate how interest accrues for reverse mortgage borrowers.

How Will a Fixed-Rate HECM Accrue Interest?

Breaking down how an adjustable-rate borrower will be charged interest is too dependent on individual circumstances and fluctuating interest rates to calculate here, but to show how interest charges can add up over the years and potentially cannibalize a home’s equity, below we have shown how an owner of a $200,000 home might be charged interest over the average seven-year life of a fixed-rate reverse mortgage contract. 

As most HECM lenders offer borrowers principal loan amounts of 30 to 70 percent of their home’s total value, our hypothetical fixed-rate borrower has received a reverse mortgage loan of 50 percent of their home’s value, giving them a loan of $100,000. This borrower is offered a fixed interest rate of 5 percent (currently about average). Because this borrower has chosen a fixed-rate HECM, the most they will receive from their loan proceeds will be equal to the FHA’s first-year limit of 58 percent, which means that this borrower will walk away with $58,000 on closing. This is the total amount for which the borrower will be charged interest.

The following is a breakdown of the borrower’s interest fees for each year of their reverse loan, which will last for the average term of an HECM contract: Seven years. As HECM interest is compounded annually, this borrower must pay interest on their interest for every year of their contract.

  • First year interest charge: $2,900
  • Second year interest charge: $3,045
  • Third year interest charge: $3,197.25
  • Fourth year interest charge: $3,357.11
  • Fifth year interest charge: $3,524.97
  • Sixth year interest charge: $3,701.21
  • Seventh year interest charge: $3,886.28
  • Total interest charges at contract’s end: $23,611.82

Our calculations show that this homeowner will be able to pay off all of their interest charges using the untouched portion of their principal loan amount ($42,000) as well as most or all of their other fees and associated interest charges. This borrower runs less risk of their loan cannibalizing their home’s equity than consumers who withdraw most, or all, of their loan proceeds using an adjustable-rate product.

How Can the Line of Credit Disbursement Option Offset Costs?

Over 60 percent of adjustable-rate HECM borrowers receive some portion of their reverse mortgage proceeds as a line of credit. This disbursement option is popular because a line of credit represents a cash reserve on which borrowers gain positive interest at the same interest rate they are charged annually for their other, withdrawn loan proceeds. A line of credit can be tapped at will, but many borrowers choose to leave an LOC untouched for as long as possible in order to offset their interest costs by receiving long-term interest gains. A line of credit is of most benefit to people who open an adjustable HECM as soon as they are able at age 62 and continue their contract for the long term.

The line of credit option can be of obvious detriment to lenders and mortgage insurance funds as they can cancel out a great deal of gains that would be made for lenders and insurance guarantors at the borrower’s expense. It is thought that, when the line of credit feature for HECMs was first designed, regulators assumed that most people would use all or most of their loan balance fairly quickly, making the line of credit feature a minimal threat to a lender’s bottom line and a good selling point for HECMs in general. Currently, there is no limit on how much of a reverse mortgage borrower’s available loan proceeds they can put into a line of credit, making this a powerful tool for adding security and maximizing a retirement portfolio.

Interest gains on a line of credit are compounded annually, just like the interest charges on other HECM proceeds. The rate at which an LOC gains interest grows or decreases with the borrower’s adjustable interest rate which, for all HECM borrowers, cannot grow by more than 5 percent over their initially offered interest rate. Borrowers who choose to have their rate adjusted on an annual basis have their interest rate capped so that it can neither grow nor decrease by more than 2 percent annually, unlike monthly adjusting borrowers who are not restricted with annual caps.

Single Purpose Reverse Mortgages for Low-Income Seniors

For low-income seniors who may need help paying property taxes, making home repairs, or with any specific and critical expense, a single-purpose reverse mortgage may be available from state and local organizations. As the name suggests, these reverse mortgages are granted to borrowers for a single purpose and are often used to cover expenses that, if left unpaid, could put the homeowner at risk of losing their home or living in an unfit environment. 

Single-purpose reverse mortgages are not structured, regulated, or insured by the FHA. Rather, the terms of these loans are determined by the organization or institution that offers them. Nonprofits, credit unions, and state government programs are the most common lenders of single-purpose reverses, but they can be offered by an array of different types of entities and offer a lower-cost alternative to an HECM reverse. 

Costs Associated with Single-Purpose Reverse Mortgages

Single-purpose reverse mortgages offer an advance on less of a homeowner’s equity than an HECM reverse mortgage would, and the costs and fees are much lower. Many lenders use a ‘simple’ interest rate accrual model rather than compounding interest year on year, so some single-purpose borrowers are not charged interest on their pre-existing interest charges and fees on a yearly basis as HECM borrowers are. Interest rates are also usually lower with a single-purpose reverse than an HECM, and these loans do not come with the added expenses of loan origination fees and mortgage insurance premiums.

Although Social Security and Medicare eligibility is not affected by a reverse mortgage loan, needs-based government programs like Medicaid and Supplemental Security Income (SSI) may be affected by the new asset that a loan represents, even in the case of single-purpose loans for needy seniors. Like an HECM, single-purpose reverse mortgages are not due and payable until the end of the loan’s term, and most people who require a single-purpose loan repay it by selling their home when their contract reaches maturity.

Locating a Single-Purpose Reverse Mortgage

Finding a single-purpose reverse mortgage lender can be a challenge as these loans are referred to by other names, such as deferred payment loans and property tax deferral programs. As single-purpose reverse loans are offered by so many different types of institutions, it’s best that prospective single-purpose borrowers turn to their local Area Agency on Aging office for help. The AAA is a national network of resource centers for elders, and each state has multiple AAA locations that specialize in helping seniors and caregivers find local resources and help with monthly bills. 

To locate your nearest AAA office, visit them online at N4A.org and use the locator tool there, or call (800) 677-1116. To ensure that your AAA representative can help you find exactly what you are looking for, ask about local options for tax deferral programs, single-purpose reverse mortgages, deferred payment loans, and home renovation loans.

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