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The Top Nine Best and Most Affordable Reverse Mortgage Lenders

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 24,000 FHA-secured reverse mortgages have already been closed in 2019.

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.

What is a reverse mortgage? 

Reverse Mortgages are a type of loan that qualified homeowners over the age of 62 can receive using their home’s equity as collateral, making these products essentially like an advance on a home’s equity that can be repaid once the home is sold. The majority of reverse mortgages closed across the U.S. are structured, regulated, and insured by the Fair Housing Administration (FHA) and the Department of Housing and Urban Development (HUD).

These government-secured loans are referred to as HECMs, ‘Heckums’, or Home Equity Conversion Mortgages. HECMs do not require repayment of the principal loan amount until the home is sold or the contract otherwise matures and the loan is paid or refinanced by other means. Because their associated costs and fees are capped by the federal government, FHA reverse mortgages can be a great option to help seniors supplement retirement income.

Our Top Picks

Below, you’ll find the top nine HECM lenders of 2019. 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.

HECM Lenders Lender Highlights
Liberty Home Equity Solutions
  • Offers price matching to compete with other lenders’ offered rates
  • Offers $100 gift cards if another lender’s rate cannot be matched
  • Offers $500 account credits if a loan takes more than 60 days to close
  • Available in all but one state (Utah)
  • Provides other financial solutions to qualified HECM borrowers
One Reverse Mortgage
  • Origination fees are never greater than 1 percent of a reverse mortgage loan amount
  • Does not charge servicing fees under any circumstances
  • Offers the most comprehensive online and mobile tools of any lender
  • HECM closing process is one of the fastest in the industry
  • Rocket Homes program can help HECM borrowers find new homes after paying off their reverse mortgage by selling
  • Provides other financial solutions
Reverse Mortgage Funding
  • Provides price matching to compete with other lenders’ offered interest rates and fees
  • Offers $500 gift cards to borrowers for whom they cannot match a competitor’s rates
  • Provides other financial solutions to qualified HECM borrowers
  • Does not sell closed contracts to other loan servicers who might charge added fees
Longbridge Financial
  • Free identity theft protection
  • Does not sell closed contracts to other loan servicers who might charge added fees
  • Guarantees a fast closing process
  • Provides other financial solutions for qualifying HECM recipients
American Advisors Group (AAG)
  • Does not charge fees for loan servicing under any circumstances
  • Available nationwide
  • Provides other financial solutions
  • Offers AAG Residential Services can help HECM borrowers find new homes after selling to pay off their debt
Quontic Bank
  • Available nationwide
  • Provides other financial products
  • Has a long-standing reputation as a traditional bank
Fairway Independent Mortgage
  • Provides other financial solutions
  • Offers technological tools for remote loan application and regionally specific loan servicing portals
  • May charge servicing fees of up to $35 per month
  • Interest-free set-aside accounts may be offered to cover servicing fee costs
Finance of America Reverse
  • Available nationwide
  • Provides other financial solutions
  • May charge servicing fees of up to $35 per month
  • Interest-free set-aside accounts may be offered to cover servicing fee costs
Retirement Funding Solutions
  • Provides other financial solutions
  • May charge servicing fees of up to $35 per month
  • Interest-free set-aside accounts may be offered to cover servicing fee costs

Liberty Home Equity Solutions

Liberty Home Equity Solutions is exclusively a lender of FHA reverse mortgages and has remained in the top five reverse mortgage lenders by volume throughout most of 2019. Currently commanding almost 5 percent of the reverse loan market, this lender has closed and serviced its share of reverse mortgages, including nearly 1,000 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 Home Equity Solutions 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.

Details of Liberty Home Equity Solutions' HECM Lending
Cost Guarantees, Rebates, or Discounts Offered
  • Offers price matching to compete with other lenders’ offered rates
  • Offers $100 gift cards if another lender rates cannot be matched
  • Offers $500 account credits if a loan takes more than 60 days to close
Other Benefits of This Lender
  • Available in all but one state
  • Provides other financial solutions to qualified HECM borrowers
Can the Application Process Be Completed Online or Over the Phone? Yes
Does This Lender Have Physical Office Locations? Yes — Liberty Home Equity Solutions employs more than 100 licensed advisors nationwide
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes — Refinance HECM only for qualified borrowers
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable Utah — Liberty does not offer direct retail loan financing in this state but may originate loans for Utah residents through third-party brokers

Liberty Home Equity Overview

Price Guarantees, Rebates, or Discounts Offered

Like most reverse mortgage lenders discussed here, Liberty Home Equity Solutions does not charge a servicing fee to cover ongoing customer service tasks. What differentiates them from many other top lenders is 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. Furthermore, Liberty advertises that it provides $500 account credits to any borrower for whom it is not able to close a loan within 60 days or less. 

HECM Repayment Options

Liberty Home Equity Solutions is exclusively a lender of FHA reverse mortgage products. What this means is that, for borrowers or heirs who do not wish to sell the mortgaged home to repay their HECM loan, Liberty cannot provide non-FHA options, such as traditional mortgage refinancing and other loans. Only HECM borrowers or their heirs who are 62 or older and who otherwise qualify for an HECM can procure a refinance HECM from Liberty Home Equity Solutions. For non-qualifying heirs who wish to keep their loved one’s home after their death, if a new, non-FHA loan product is needed to pay the existing debt, they will have to comparison shop with other lenders to find their best option.

Liberty Home Equity Solutions offers the following products:

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

Online Application and Customer Service Technologies

As Liberty is a smaller lender than some other institutions covered here thus far, their online tools are somewhat limited. However, Liberty Home Equity is known for transparency, and that shows on Liberty’s website. HECM shoppers can find information on LibertyReverseMortgage.com that explains their entire application and closing process, as well as what to expect from a HUD counseling session and ways to find out if a reverse mortgage is right for a prospective borrower’s individual circumstances. 

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, including weekly updates. However, borrowers should attend their loan closing appointment. Liberty’s application process can be completed over the phone, and part of its customer service pledge, the Liberty Iron Clad Guarantee, offers the promise that all applicants will be able to speak with a loan professional who is specifically dedicated to servicing their file, and that 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 Home Equity Solutions 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.

One Reverse Mortgage

One Reverse Mortgage has maintained its position as the second-largest reverse mortgage lender by volume throughout 2019, currently commanding an 8.48 percent market share with more than 1,340 reverse mortgages closed as of June this year. As a division of digital giant Quicken Loans, this lender has a comprehensive suite of online customer service tools and now has four physical locations in the U.S. where lenders can meet face-to-face with a loan officer. 

Another benefit of One Reverse Mortgage’s relation to Quicken Loans is that reverse mortgage borrowers with this lender can procure other financial products through its professional affiliates, such as mortgage refinancing and other options to help repay an HECM loan. One Reverse Mortgage currently lends in 47 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.

Details of One Reverse Mortgage’s HECM Lending
Cost Guarantees, Rebates, or Discounts Offered
  • Pledges never to charge origination fees greater than 1 percent of a reverse mortgage loan amount
  • Does not charge servicing fees under any borrower circumstances
Other Benefits of This Lender
  • Offers the most comprehensive online and mobile tools of any lender
  • ORM’s use of technology makes their HECM closing process one of the fastest in the industry
  • Provides other financial solutions
  • Rocket Homes program helps HECM borrowers find new homes after paying off their reverse mortgage by selling
Can the Application Process Be Completed Online or Over the Phone? Yes 
Does This Lender Have Physical Office Locations? Yes — One Reverse Mortgage now has four physical locations in Detroit, Honolulu, San Diego, and Las Vegas
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes 
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable
  • West Virginia
  • Vermont
  • Rhode Island

One Reverse Mortgage Overview

Price Guarantees, Rebates, or Discounts Offered

Like most of the top reverse mortgage lenders of 2019, One Reverse Mortgage does not charge monthly servicing fees to cover ongoing customer service tasks, such as document filing and direct support. But unlike most other lenders, One Reverse Mortgage does offer some quantifiable information regarding their loan origination fees, and they’re likely to be some of the lowest origination fees in the industry.

Origination fees for HECM reverse mortgages can equal up to 2 percent of a borrower’s home value, up to a total cap of $6,000. However, One Reverse Mortgage does not base the amount of this fee on home value but rather uses the offered loan amount as their basis for origination fees. Reverse loan amounts are usually equal to only 30 to 70 percent of a borrower’s home value, and One Reverse guarantees that its loan origination fees will never exceed 1 percent of that principal amount. 

HECM Repayment Options

Being a division of Quicken Loans, One Reverse Mortgage can offer HECM borrowers other financial products and services without the need to begin a relationship with a new financial institution. This can be an important distinction among reverse mortgage lenders as some borrowers or their heirs choose not to sell their homes to repay a reverse loan, opting instead to refinance the loan into a traditional mortgage or to pay the balance using a new reverse mortgage (a refinance HECM). 

One Reverse Mortgage and its parent company, Quicken Loans, can provide multiple repayment and refinance options, including:

  • Conventional mortgages
  • Jumbo (non-FHA) reverse mortgages
  • HECMs
  • Refinance HECMs
  • VA loans
  • USDA loans

Online Application and Customer Service Technologies

One Reverse Mortgage specializes in closing and servicing loans without the need for borrowers to ever visit an office. The entire application process can be completed from the comfort of home. One Reverse Mortgage provides everything from secure online document signing to loan management apps and software that keep borrowers connected. 

The key benefit of banking with One Reverse Mortgage is its ability to close loans faster than many other lenders thanks to an advanced suite of online tools. Applying for a reverse mortgage with this lender offers one of the fastest closing processes in the industry due to its ability to verify any source of income for borrowers who use direct deposit for their primary employment income, Social Security, and other income sources. 

Quicken Loans has created a sophisticated collection of loan and mortgage software that can lead applicants through a simple and streamlined application process, complete with the ability to directly download income and employment information from 98 percent of U.S. financial institutions. One Reverse Mortgage offers reverse mortgage applicants a fully guided application process, with licensed loan specialists accessible both online and over the phone. Quicken’s other resources for borrowers, Rocket Mortgage and Rocket Loans, can help current reverse mortgage borrowers find their best means of repaying an HECM, and Rocket Homes can make home shopping much easier for HECM borrowers after selling a primary residence.

Locations and Availability

Though One Reverse Mortgage primarily conducts business online or over the phone, it operates four U.S. locations where borrowers can meet with loan officers and licensed specialists in person. These offices are located in Detroit, Honolulu, San Diego, and Las Vegas. Branch contact information can be found by calling the ORM national customer contact number, (800) 919-6588, or by visiting OneReverseMortgage.com. Currently, the only states where One Reverse Mortgage does not offer HECM loan products are West Virginia, Vermont, and Rhode Island, though One Reverse may expand to these states in the future. 

Reverse Mortgage Funding

Another top lender by volume in 2019, Reverse Mortgage Funding LLC has retained a 7 percent market share for the month of June and has closed more than 1,125 HECM reverse mortgages this year. As a member of the National Reverse Mortgage Lenders Association, Reverse Mortgage Funding has demonstrated its commitment to ethical business practices in lending.

RMF is known for its Customer for Life program, which offers price matching guarantees as well as a pledge that this lender will never close a loan only to sell it on the securities market to another loan servicing entity. Not all lenders will make such a guarantee, and it ensures that borrowers with Reverse Mortgage Funding will remain in contact with the same team of dedicated loan officers throughout the life of their HECM contract.

Details of Reverse Mortgage Funding’s HECM Lending
Cost Guarantees, Rebates, or Discounts Offered
  • Provides price matching to compete with other lenders’ offered interest rates and fees
  • Offers $500 gift cards to borrowers for whom they cannot match a competitor’s rates
Other Benefits of This Lender
  • Provides other financial solutions for qualified HECM borrowers
  • Does not sell closed contracts to other loan servicers who might charge added fees
Can the Application Process Be Completed Online or Over the Phone? Partially
Does This Lender Have Physical Office Locations? Yes — RMF has main branch locations in California, New York, and New Jersey, as well as broker locations nationwide
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes — for qualified HECM borrowers
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable
  • Hawaii
  • New York

Reverse Mortgage Funding Overview

Price Guarantees, Rebates, or Discounts Offered

Reverse Mortgage Funding provides a price matching guarantee, which it calls the Customer for Life program. Under the Customer for Life program, borrowers are provided with the lender’s promise that their loan will never be sold on the securities market to another loan servicer that might charge added fees. More importantly, RMF also offers to match the offered estimates of other lenders and provides $500 gift cards to current borrowers for whom it could not match a better rate. 

HECM Repayment Options

Reverse Mortgage Funding deals exclusively in reverse mortgages, though they can offer new loans to individuals who qualify for an HECM and desire to remain in their home once their reverse mortgage has come due and payable. This lender’s refinance HECMs and jumbo reverse mortgage products can provide more options to borrowers or heirs who do not wish to sell the reverse mortgaged home to repay the loan, without the need to shop around with other lenders.

However, unlike some lenders discussed in this guide, Reverse Mortgage Funding’s loan offerings are somewhat limited. RMF only provides reverse mortgages, including HECMs and jumbo reverse products. Applicants for a reverse mortgage, whether it is FHA-backed or privately offered, usually need to be at least 62 years old and will need to meet other qualifications as well. Reverse Mortgage Funding may provide jumbo HECMs to borrowers as young as 60 in certain states.

Reverse Mortgage Funding offers the following loan products.

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

Online Application and Customer Service Technologies

This lender offers to send a licensed loan specialist to an applicant’s home to go over any information that needs clarifying, but they do not offer a completely remote application process online or over the phone. While some aspects of the application process can be completed remotely with RMF, applicants may require the use of traditional mail and/or in-person visits to complete their application and document signing.

Locations and Availability

Reverse Mortgage Funding has permanent branch locations in New York, New Jersey, and Hawaii, as well as licensed loan officer locations throughout the country. RMF is licensed to offer loan origination and servicing in every state but Hawaii and New York. Reverse mortgage shoppers in New York must contend with state regulations that may complicate their ability to procure a reverse mortgage from certain lenders, and though RMF does have headquarters in that state, they do not currently offer reverse mortgages in New York. To find a Reverse Mortgage Funding loan officer near you, call (888) 277-1567 or contact RMF online at ReverseFunding.com.

Longbridge Financial 

Longbridge Financial has entered the month of June with a 2.5 percent market share among direct reverse mortgage lenders and nearly 350 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.

Details of Longbridge Financial’s HECM Lending
Cost Guarantees, Rebates, or Discounts Offered
  • Free identity theft protection
  • Does not levy monthly servicing fees
  • Does not sell closed contracts to other loan servicers who might charge added fees
Other Benefits of This Lender
  • Guarantees fast closing process
  • Provides other financial solutions for qualifying HECM recipients
Can the Application Process Be Completed Online or Over the Phone? Yes
Does This Lender Have Physical Office Locations? Yes — Longbridge Financial products can be found nationwide via third-party brokers
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes — Refinance HECM products only
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable Undetermined: Longbridge originates and services loans in most states

Longbridge Financial Overview

Price Guarantees, Rebates, or Discounts Offered

Though this lender does not currently advertise any price matching or cost guarantees to prospective borrowers, it offers other products and services that can add savings and security to its clients’ retirement. Longbridge Financial provides free identity theft protection to its clientele, and as part of the Longbridge Commitment, pledges to close reverse mortgage loans within 45 days or less and to never charge any hidden fees. 

A cost-saving feature of working with Longbridge is that this lender does not charge monthly servicing fees for ongoing administrative and customer service work. Longbridge Financial is one of the few reverse lenders that pledges never to sell a borrower’s contract on the securities market, ensuring that their 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. For heirs who wish to avoid selling the home and instead refinance a reverse mortgaged home using a Longbridge refinance HECM, their ability to use the product will be contingent on whether they can qualify for an HECM, limiting these products to people 62 and older.

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 make contact with 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 31.66 percent market share among other reverse lenders for the month of June, in 2019, AAG has provided about 5,000 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.

Details of American Advisors Group’s HECM Lending
Cost Guarantees, Rebates, or Discounts Offered Does not charge fees for loan servicing under any circumstances
Other Benefits of This Lender
  • Available nationwide
  • Provides other financial solutions
  • Offers AAG Residential Services to help HECM borrowers find new homes after selling to pay off their debt
Can the Application Process Be Completed Online or Over the Phone? Yes
Does This Lender Have Physical Office Locations? Yes — AAG has licensed loan officers location all over the country and branch locations in California, Hawaii, New York, Georgia and Texas
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes 
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable Currently available in all states

American Advisors Group Overview

Price Guarantees, Rebates, or Discounts Offered

At present, the only cost advantage that AAG advertises to reverse mortgage borrowers is that it does not charge a servicing fee throughout the life of an HECM loan. Servicing fees may be charged by some lenders to cover costs associated with long-term customer service, such as document filing, loan management, and other administrative tasks. Most lenders have abandoned the practice of charging a monthly fee for loan servicing and instead include these costs as part of a borrower’s interest rate. While this lender may offer competitive HECM rates, AAG does not advertise any kind of price matching program, rebates or maximum caps on their costs and fees, so finding out if this lender can offer competitive rates will require prospective borrowers to contact AAG for an estimate. 

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 can provide 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

Even though AAG is the largest reverse mortgage lender covered here, this company has not released many notable online tools for consumers other than its reverse mortgage estimate calculator. This is likely due to the fact that almost 70 percent of HECM reverse mortgage clients do business with their lenders primarily over the phone. While reverse mortgage borrowers with AAG may not have the technological tools available that online lenders like One Reverse Mortgage offer, reverse mortgages with AAG can be applied for online or over the phone without the need to see a loan officer face-to-face, and AAG borrowers have many high-quality sources of reverse mortgage information available at AAG.com. However, the FHA does recommend that reverse mortgage borrowers should attend their loan closings to ensure that they understand exactly what they are signing. Closing meetings can be conducted in the borrower’s home.

Locations and Availability

AAG is one of the only top lenders of 2019 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 100 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 2019 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.

Details of Quontic Bank’s HECM Lending
Cost Guarantees, Rebates, or Discounts Offered Does not charge monthly servicing fees 
Other Benefits of This Lender
  • Available nationwide
  • Provides other financial products
  • Has a long-standing reputation as a traditional bank
Can the Application Process Be Completed Online or Over the Phone? Yes
Does This Lender Have Physical Office Locations? Yes — Quontic Bank has main branch locations in New York, Georgia, and Florida, as well as broker locations across the country
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes 
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable Available in all states

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. The benefit of applying for a reverse mortgage with lenders of multiple products is that, when you sign an HECM contract, you are signing up for a long relationship with your lender. Should borrowers need any financial products throughout the life of the loan or after it has closed, banks like Quontic can provide multiple options without the need for borrowers to initiate new relationships elsewhere. Sometimes banks will also offer deals and benefits to borrowers who already have accounts with them.

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 at [email protected].

Fairway Independent Mortgage

Fairway Independent Mortgage has been a top lender in 2019 with a nearly 4 percent market share and over 500 reverse mortgage loans closed since 2018. 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.

Details of Fairway Independent Mortgage’s HECM Lending
Cost Guarantees, Rebates, or Discounts Offered
  • This lender may charge servicing fees
  • Interest-free set-aside accounts may be offered to cover servicing fee costs
Other Benefits of This Lender
  • Provides other financial solutions
  • Offers technological tools for remote loan application and regionally-specific loan servicing portals
Can the Application Process Be Completed Online or Over the Phone? Yes
Does This Lender Have Physical Office Locations? Yes — Fairway Independent has multiple office locations across the country
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes 
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable
  • Alaska 
  • West Virginia

Fairway Independent Mortgage Overview

Price Guarantees, Rebates, or Discounts Offered

Some lenders will charge a monthly servicing fee to cover costs associated with ongoing customer service, administrative tasks, and disbursements throughout the life of a loan. 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. Currently, Fairway does originate loans in New York, Nevada, and Hawaii, but does not service loans in these states. 

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 reverse mortgage borrowers in their state, and where they can easily contact a small and dedicated team of professionals whose job it is to 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 with this lender can be completed using these tools, including digital document downloads and signing.

Locations and Availability

Even though Fairway Independent has ample online resources that allow borrowers to complete most tasks remotely, this lender has more physical office locations than many of the other top lenders of 2019 discussed here. 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 2019. FAR has become the third-largest lender of HECM reverse mortgages by volume, with 8.4 percent market share this June and over 1,300 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-three reverse mortgage lender through 2019.

Details of Finance of America Reverse’s HECM Lending
Cost Guarantees, Rebates, or Discounts Offered
  • This lender may charge servicing fees
  • Interest-free set-aside accounts may be offered to cover servicing fee costs
Other Benefits of This Lender
  • Available nationwide
  • Provides other financial solutions
Can the Application Process Be Completed Online or Over the Phone? Partially
Does This Lender Have Physical Office Locations? Yes — Finance of America Reverse has main branch locations in Tula, New York, San Diego, and Indianapolis, as well as numerous loan officers available nationwide
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes 
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable Currently available in all states

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. Lenders who charge a servicing fee can sometimes provide an interest-free set-aside account, which is a portion of a reverse mortgage loan that is set aside to cover servicing costs so that they will never accrue interest. 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, and which already has financial and employment information for the borrower or heir. 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. And as per usual, the FHA recommends that all reverse mortgage borrowers personally attend their closing appointment so that they understand exactly what they are signing and can verify who they are doing business with. 

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.

Retirement Funding Solutions

Retirement Funding Solutions is a subsidiary of Mutual of Omaha Bank, and previously did business as Synergy One Lending. This lender has maintained a top position by closing almost 1,000 reverse loans in 2019, and RFS currently holds a 5.7 percent market share among reverse mortgage lenders.

Though Retirement Funding Solutions specializes in FHA reverse mortgages, its relation to Mutual of Omaha provides RFS borrowers with an array of financial options to repay an HECM loan, as well as a built-in customer care environment. RFS 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.

Details of Retirement Funding Solutions’ HECM Lending
Cost Guarantees, Rebates, or Discounts Offered
  • This lender may charge servicing fees
  • Interest-free set-aside accounts may be offered to cover servicing fee costs
Other Benefits of This Lender Provides other financial solutions
Can the Application Process Be Completed Online or Over the Phone? Yes
Does This Lender Have Physical Office Locations? Yes — Retirement Funding Solutions is headquartered in San Diego, CA and offers lender and third-party broker locations in up to 48 states
Can This Lender Provide Other Products to Help Repay a Reverse Mortgage? Yes — RFS is a subsidiary of Mutual of Omaha Bank
Is This Lender a Member in Good Standing with the NRMLA? Yes
States Where Unavailable
  • West Virginia
  • New York

Retirement Funding Solutions Overview

Price Guarantees, Rebates, or Discounts Offered

Retirement Funding Solutions does not currently advertise any price matching programs or cost guarantees to prospective borrowers, and unlike most modern reverse mortgage lenders, RFS may charge borrowers monthly servicing fees of up to $35 which can be paid using part of the loan proceeds. Lenders who charge this fee can offer some borrowers an interest-free set-aside account, which is a portion of a reverse mortgage loan that is set aside to cover servicing fee costs so that they will not accrue interest. 

Retirement Funding Solutions has built a large book of business in reverse mortgage lending and may prove to be an attractive option to many borrowers. To find out if RFS can offer competitive fees and interest rates, reverse mortgage shoppers should contact Retirement Funding Solutions for an estimate.

HECM Repayment Options

Retirement Funding Solutions is exclusively a lender of FHA reverse mortgages (HECMs), but being a subsidiary of Mutual of Omaha Bank, RFS borrowers have the benefit of flexible repayment options. For borrowers or heirs who do not wish to sell their reverse mortgaged home to repay an HECM, the products offered by this lender’s direct affiliates can offer other financial instruments to make the repayment process simpler and more affordable — without having to shop around for a new lender. 

Retirement Funding Solutions and their affiliated institutions can offer 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’s previous DBA of Synergy One Lending had a more established online ecosystem for potential borrowers and current clients, but Retirement Funding Solutions offers a much more pared-down online presence. While Retirement Funding Solutions may be lacking in technological customer service tools, applications with this lender can be completed over the phone and notaries can be sent to borrowers’ homes to facilitate the closing process.

Locations and Availability

Retirement Funding Solutions 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 the RFS location nearest you, call (877) 721-3847 or contact them online at RFSLends.com. 

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 of 2019 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. 

The Department of Housing and Urban Development (HUD) releases the average interest rates charged for HECMs each month on a two-month delay. The following is a breakdown of average rates for both fixed-rate and adjustable-rate HECMs that have been closed from January of 2018 up to May 2019.

Date Fixed-Rate HECMs HECMs
01/01/2018 4.9% 4.65%
02/01/2018 4.84% 4.66%
03/01/2018 4.76% 4.65%
04/01/2018 4.72% 4.76%
05/01/2018 4.66% 4.83%
06/01/2018 4.65% 4.79%
07/01/2018 4.64% 4.79%
08/01/2018 4.63% 4.79%
09/01/2018 4.65% 4.8%
10/01/2018 4.64% 4.84%
11/01/2018 4.68% 4.91%
12/01/2018 4.69% 5.03%
Current Rates for 2019
01/01/2019 4.75% 5.1%
02/01/2019 4.77% 5.06%
03/01/2019 4.78% 4.92%
04/01/2019 4.77% 4.83%
05/01/2019 4.75% 4.73%

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. Though interest rates in general have been rising since 2018 and could rise further in the coming years, rates took a dip in the first half of 2019, largely in response to trade tensions between the U.S. and China and resultant economic losses in the U.S. manufacturing sector.

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 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. As of June 2019, the one-month LIBOR index sits at 2.4 percent and the one-year rate is at 2.2 percent. Current interest rate predictions are uncertain, as the outcomes of trade disputes among major world powers will be a key factor in whether rates rise on the Fed’s previously planned trajectory or fall in response to ongoing tensions. 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.

How Will Your Origination Fees Accrue Interest?

Origination fees for fixed-rate and adjustable rate HECMs (excluding HECMs for purchase) can be rolled into the available loan amount, deferring payment of this fee until the loan reaches maturity. However, this means that the origination fee will accrue interest over time, and HECM interest is compounded on a yearly basis. The amount of an origination fee is primarily based on the value of the borrower’s home and can cost from about $2,500 up to a maximum cap of $6,000. 

The following scenarios demonstrate what borrowers with different home values will pay after an average HECM loan term of seven years if they are each offered a 5 percent interest rate and are charged the FHA’s maximum origination fee for their respective property values. This demonstration assumes that the borrowers’ interest rates are not significantly adjusted throughout the seven-year “lifespan” of their loans, remaining at an average of 5 percent.

Borrower A: This borrower’s home is worth $125,000 and their lender has assessed the FHA’s maximum origination fee for homes worth up to $125,000, which is $2,500. As this origination fee compounds interest at 5 percent over seven years, it will grow to a final amount of $3,517.75.

Borrower B: This borrower’s home is worth $200,000. Their lender charges the FHA maximum origination fee of 2 percent of their home’s value, which adds up to $4,000. After seven years, their loan becomes due and payable. Their origination fees and compounded origination fee interest of 5 percent come to a cost of $5,628.40.

Borrower C: This borrower’s home is worth $500,000. In keeping with FHA regulations, they are charged the maximum origination fee of 2 percent of their home’s first $200,000 of value and 1 percent of the remaining amount of $300,000. This brings their total origination fee up to the maximum allowable for any borrower, which is $6,000. After seven years of compounding interest at a 5 percent rate, their total origination fee will be $8,442.60.

As you can see, borrowers whose interest rates are relatively stable throughout an average, seven-year HECM loan term can expect to pay an additional $1,000 to $2,500 of interest if they opt to defer payment of their origination fees. However, some lenders may offer lower origination fees than the FHA’s maximum caps illustrated above.

How Will Your Mortgage Insurance Premiums Add Up?

On top of the 2 percent of total home value that is charged up front for the FHA’s initial mortgage insurance fee, mortgage insurance premiums are charged at an annually assessed rate of 0.5 percent of a homeowner’s outstanding loan balance (the amount of their loan that they’ve withdrawn). Premiums must only be paid for the first five years of an HECM contract or until the borrower has withdrawn 78 percent of their available loan, whichever occurs first. 

The average amount of an HECM loan can range from about 30 percent to 70 percent of a home’s value. Bearing that in mind, we will illustrate some hypothetical mortgage insurance premium amounts for three owners of $250,000 homes. All three are offered a total HECM loan equal to 50 percent of their home’s value, giving them each a total loan of $125,000. They will each choose to receive 58 percent of that loan amount ($72,500) within the first five years of their contracts. The most significant difference between these borrowers is that one of them chooses a fixed-rate HECM and the other two choose adjustable-rate HECMs. 

Our calculations show that fixed-rate HECM borrowers may be likely to pay marginally more for mortgage insurance than adjustable-rate borrowers of equal loan amounts, and that adjustable-rate borrowers who use 78 percent of their loan within the first two years of their contract will save the most on MIPs, though the amount they save is likely to be marginal as well.

Borrower A: This homeowner opts to receive a fixed rate HECM which offers only a lump sum payment at closing. The FHA’s 58 percent first-year limit on HECM payments will limit the available amount of this borrower’s loan proceeds to a total of $72,500, which they must take on closing the contract. The cost of this borrower’s yearly mortgage insurance premiums will be equal to 0.5 percent of their outstanding balance of $72,500 — a total of $362.50 per year. After five years, when the mortgage insurance premiums will no longer be charged to the borrower, this person will have paid a total of $1,812.50 in MIPs. 

Borrower B: This homeowner instead opts to receive an adjustable-rate HECM. They choose to take ongoing, equal monthly payments, receiving a total of $14,500 each year for the first five years of their contract. Like Borrower A, by year five, they will have used 58 percent of their loan, which equals $72,500. Because this borrower has decided to take their disbursements gradually rather than in a lump sum, their total mortgage insurance premium amount due at maturity will total $1,094.80. Both borrowers have received the same amount of cash in the first five years of their contract. However, compared to Borrower A, Borrower B’s tactic of taking relatively small, ongoing payments rather than a lump sum saves them $718 in mortgage insurance premiums over seven years. 

Borrower C: Like Borrower B, this homeowner receives an adjustable-rate HECM which will allow them to take advantage of most of their loan proceeds. However, this borrower opts to withdraw 78% of their loan proceeds as quickly as possible. The borrower uses short-term monthly disbursements to withdraw the full amount of the FHA’s first-year limit within the first 12 months of their contract, which equals $72,500. In the following year, they employ line of credit disbursements to take another 20 percent of their loan proceeds. Because this borrower reaches an outstanding balance of 78 percent within their second year of reverse mortgage borrowing, they will only pay mortgage insurance premiums for those two years, and their premium amounts will be based on each year’s outstanding balance. Their first year’s MIP charge will be $362.50 and their second year’s charge will be equal to 78 percent of their $125,000 loan, making their second-year MIP charge $487.50. They will pay a total of $850 in mortgage insurance premiums — the lowest rate among our three borrowers. 

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.