Best Reverse Mortgage Lenders

What are reverse mortgages?

Qualified homeowners age 62 and older can use a reverse mortgage to borrow against their home equity without having to make monthly payments back to the lender. With a reverse mortgage, you can receive a one-time cash payout or regularly recurring disbursements. The money isn’t due back until you move, sell the home or die.

Reverse mortgage requirements

There are specific requirements you must meet to qualify for a reverse mortgage. Along with being the correct age, you must also:

• Live in the home as your primary residence
• Own your home outright or have a low mortgage balance
• Not be behind on federal debts
• Have your own funds set aside for property taxes, homeowners insurance and any homeowners association (HOA) fees
• Keep your home in good shape
• Go through Department of Housing and Urban Development-approved mortgage counseling (for a HECM)

Since a reverse mortgage is a nonrecourse loan, lenders can’t demand back more than the home is worth. If the property is sold for more than the debt on the loan, you (or your estate) are entitled to the surplus.

Types of reverse mortgages

Each lender will offer different reverse mortgage solutions, but the most common options include the following:

• Home Equity Conversion Mortgages (HECMs): These are the most common types of reverse mortgages and are backed by the U.S. Department of Housing and Urban Development (HUD). The funds can be used for any purpose.
• Proprietary reverse mortgages: Also known as jumbo reverse mortgages, these are privately insured by the mortgage companies due to the higher value of the home.
• Single-purpose reverse mortgages: These are offered by some state and local government agencies for a specific purpose defined by the lender, such as home improvements or property taxes.
• HECM for purchase: This is a special type of HECM that allows seniors to purchase a new home and obtain a reverse mortgage within a single transaction.

» MORE: How do you pay back a reverse mortgage?

How much does a reverse mortgage cost?

You’ll want to make sure you consider all the costs of a reverse mortgage. For instance, like a traditional mortgage, you’ll need to pay closing costs, origination fees and an appraisal fee.

You might also need to pay a counseling fee or mortgage insurance premiums. And you’ll still be responsible for things like homeowners insurance, taxes and home maintenance costs.

While fees will vary by lender, you can expect to pay the following:

• Origination fee: For homes valued less than $125,000, the fee is capped at $2,500. For homes valued higher, the lender is allowed to charge 2% on the first $200,000 and 1% on the value of the home above $200,000 for a maximum of $6,000.
• Appraisal fee: This can typically range between $300 and $500.
• Closing costs: These costs are paid to third parties and cover items like title search, recording fees, credit checks and mortgage taxes.
• Ongoing costs: Additionally, you will have to pay interest, service charges and an annual mortgage insurance premium of 0.50% on your outstanding mortgage.

How to get a reverse mortgage

Getting a reverse mortgage is a big decision. Because your primary residence is collateral for a reverse mortgage loan, it’s crucial to talk to your spouse, children or other heirs about whether or not they plan to live in your house after you. If you want to keep the house in your family, your children can potentially refinance your mortgage loan and maintain the title.

The reverse mortgage application process typically takes between 30 and 45 days. If you’re eligible for a reverse mortgage and decide it’s the right move for you and your family, these are the steps you need to take.

Reverse mortgage pros and cons

“Reverse mortgages can benefit older individuals with fixed or reduced income,” said Dan Green, the CEO of Cincinnati-based mortgage company Homebuyer.com. “Through a reverse mortgage, homeowners can cease making conventional mortgage payments and, in turn, receive income from their property.”

Another pro of a reverse mortgage is that your funds aren’t taxed, and they will not affect other retirement income streams, like Social Security. Since it is a nonrecourse loan, reverse mortgage lenders won’t charge you more than the current value of the property.

While reverse mortgages can be helpful for many homeowners, there are some downsides to consider, too. There’s a risk of foreclosure. You must be able to afford your property taxes and homeowners insurance and maintain the property to avoid defaulting on your reverse mortgage. If the home is a significant part of the planned inheritance, a reverse mortgage could reduce the amount left for heirs. Also, reverse mortgages can have higher upfront costs compared to traditional mortgages.

» MORE: Can you refinance a reverse mortgage?

How do reserve mortgage customers rate the experience?

We analyzed three years of consumer ratings on our site and calculated an overall satisfaction for reverse mortgage lenders of 4.5 stars.

Out of 84,119 reviews collected, 87% or 73,491 customers gave their lender a four- or five-star review. Companies that we chose as our top picks in this guide all have an overall satisfaction rating of 4.4 stars or higher.

Other key takeaways from our analysis of reverse mortgage lenders on ConsumerAffairs include:

• The quality of staff and service is one of the most important aspects to reverse lender customers. Our top picks were also the three companies that had the most positive reviews in regard to service and staffing. Reverse mortgages can be a complicated, long process, so it is crucial to have experienced staff who can make the process seamless.
• Reverse mortgage customers are most likely to comment negatively about fees. Although reverse mortgages can eliminate your monthly payment, there will still be several fees to set up the process. Ask how much the process will cost during your initial consultation.

We also examined 1-star reviews on our site from several reverse mortgage companies. The most common complaint was about communication issues and delays. Some customers also expressed annoyance over having to get multiple appraisals.