Find the Best Reverse Mortgage Lenders

Many people think of reverse mortgages as a last-resort source of income, but reverse mortgages can also be a smart financial tool for eligible homeowners in retirement. Reverse mortgages provide seniors with an alternative way to access their equity without refinancing or selling their homes.

Most people access about
60% of a home’s value
through a reverse mortgage

To understand the basics of reverse mortgage lending, you first need to understand how home equity works. Equity is the difference between your home's fair market value and the balance of your loan on the property. In other words, your home equity is the percentage of your home that you own.

With a reverse mortgage, you get a one-time cash payout or regularly recurring disbursements in exchange for reduced equity. Each reverse mortgage payment you receive reduces your overall equity. The title of your house stays in your name, and your lender uses the property as collateral against the reverse mortgage loan. Your mortgage loan balance increases over time through a process called negative amortization.

Reverse mortgage loans are due when the borrower sells the property, permanently leaves the residence or breaks the loan terms in some way (for example, not paying property taxes). In 2020, the maximum lending limit for anyone through a home equity conversion mortgage (HECM) is $765,600. The maximum amount you can receive depends on how much equity you have built up and other factors.

Once you understand what a reverse mortgage is and how it works and complete a financial assessment, you should compare reverse mortgage company reviews to find a trustworthy lender.

Types of reverse mortgages

• Home equity conversion mortgage: A home equity conversion mortgage, or HECM (typically pronounced “heck-um”), is a mortgage backed by the Federal Housing Authority. The FHA capped the maximum HECM lending limit at $765,600 in 2020. Borrowers can use the money from a HECM for any purpose they wish, including living expenses or home repairs.
• Proprietary reverse mortgage: Proprietary reverse mortgages aren’t insured by the government. Since they are not as federally regulated, jumbo reverse mortgages can have different rules regarding nonborrowing spouses by state, and funds might affect some government assistance programs. Many proprietary jumbo reverse mortgage loans are available up to $4 million.
• HECM for Purchase: A HECM for Purchase loan leverages a borrower’s existing equity to finance a new house, usually to downsize, move closer to family or transition into a retirement community. HECM for Purchase loans don’t require monthly mortgage payments, but they do require that you keep up with mortgage insurance premiums and property taxes. Perhaps the most significant advantage of a HECM for Purchase is that you only have to pay one set of loan closing costs.
• Single-purpose reverse mortgage: Unlike HECM and proprietary reverse mortgage loans, funds acquired through single-purpose reverse mortgages must be used for lender-approved expenses, which can include property taxes or crucial home repairs. A single-purpose reverse mortgage is sometimes referred to as a property-tax deferral program or deferred payment loan. Lenders usually don’t charge origination fees, and closing costs are minimal.

Reverse mortgage payment options

• Lump-sum payment: Lump-sum payments are received all at once in a single disbursement. Most commonly, lump-sum payments are used in HECM for Purchase reverse mortgages.
• Fixed monthly payment: Fixed monthly payments are disbursed regularly each month. If you opt into fixed monthly payments, you can select from term or tenure payments.
  • Term payments are received over a specific amount of time, typically between five and ten years.
  • Tenure payments are received as long as the borrower resides in the home as their primary residence.
• Line of credit: A line of credit lets borrowers access funds as needed. The line of credit grows over time, but borrowers do not earn interest.

The true cost of your reverse mortgage is determined by several factors, including your loan terms, interest rates and the timing of payout distributions. The Truth in Lending Act requires lenders to provide a Good Faith Estimate that itemizes all reverse mortgage fees. Lenders must also disclose your total annual loan cost (TALC), which is similar to how standard mortgage lenders must disclose the annual percentage rate (APR).

Upfront reverse mortgage costs

The upfront costs associated with a reverse mortgage include various fees and the initial mortgage insurance premium.

• Counseling fee: Mandatory counseling with a HUD-approved third-party HECM counselor typically costs around $125.
• Appraisal fees: Average home appraisal costs range from $300 to $500. Professional home appraisals are required for HECM.
• Loan origination fee: Reverse mortgage lenders can charge up to $6,000 in loan origination fees. Reverse mortgage loan origination fees are based on your current home value.
• Closing costs: Closing costs include fees for credit checks, document preparation, loan recording, couriers, inspections, and title insurance. Average reverse mortgage closing costs are between $600 and $2,000 but vary depending on the type of loan and the state in which you live. Eligible homeowners have the option to pay closing fees upfront or bundle closing costs into their reverse mortgage loan.
• Initial MIP: Initial mortgage insurance premiums cost up to 2% of the loan amount and are due at loan closing.

Ongoing reverse mortgage costs

Even though you receive payments after you close on a reverse mortgage loan, keep in mind the following ongoing costs.

• Loan interest: Reverse mortgage loans accumulate interest based on the funds received. Just like traditional mortgages, reverse mortgages are available with fixed or adjustable interest rates.
• Property taxes: You must continue to pay property taxes when you take out a reverse mortgage. Failing to do so could violate the loan terms of your loan and put you in default.
• Insurance premiums: Annual mortgage insurance premiums (MIP) make up about half a percentage point of the outstanding mortgage balance. Homeowner’s insurance is also required, and companies require flood insurance in some areas.
• Servicing fees: Reverse mortgage lenders charge monthly fees for administering the loan. Servicing fees are a fixed amount, usually less than $40, and are due each month.
• Home costs: You must keep your property in good condition, so plan on paying regular costs for maintenance. A reverse mortgage loan can wind up in default if a borrower violates their terms by neglecting the collateral property.

Getting a reverse mortgage can be a confusing process, but it’s much easier if you find the right lender to work with.

Before you apply for a reverse mortgage

1. Confirm your eligibility: To be eligible for a reverse mortgage, you must be at least 62 years old and own a substantial part of your home. There’s no minimum credit score or income requirements, but the property you take a reverse mortgage out against must be your primary residence. Some financial institutions offer proprietary reverse mortgage products to homeowners as young as 60, but those fees aren’t as regulated or capped by a government agency. To meet HECM property requirements, you must live in a single-family home or two-to-four unit property.
2. Complete a financial assessment: If you’re eligible for a reverse mortgage, the next thing you should do is find out the fair market value of your house and exactly how much is left on your first mortgage. You can see how much you owe on your house on your monthly mortgage statement. A reverse mortgage usually isn’t a good idea if you don’t plan on spending the rest of your life in the home. Remember, the loan becomes due when you die or permanently move out of the property.
3. Talk to your family: Since your primary residence is collateral against a reverse mortgage loan, it’s crucial to talk to your spouse, children or other heirs about whether they plan to live in your house once you pass. If you want to keep the house in your family, your children can potentially refinance your mortgage loan and maintain the title.

Finding the right reverse mortgage lender

1. Compare multiple companies: It’s a good idea to compare at least three different lenders to make sure you get the best rates available. As you compare reverse mortgage companies, ask each lender how much you can qualify for, what your payment options are, if there are any restrictions on the funds and what kind of fees you should expect to pay. Look for a national reverse mortgage lender that can walk you through the whole process and doesn’t resort to high-pressure sales tactics.
2. Collect important documents: Before you get reverse mortgage counseling and start filling out applications, it’s smart to get all the right documentation in order. You need a valid government-issued identification (driver’s license or passport), verification that the property is your primary residence (bank statements or voter registration), proof of income (W-2, Social Security award letter or pay stubs) and your counseling certificate.
3. Get HUD-approved counseling: You are required to meet with a counselor that is approved by the U.S. Department of Housing and Urban Development before applying for a reverse mortgage. Your counselor sends you information before your session so you can prepare. During the counseling session, you learn more about how a reverse mortgage affects you and your family. Your counselor also helps you compare alternatives to reverse mortgages, like cash-out refinancing or a home equity loan. After the counseling session, you receive a certificate of completion stating that you understand the basics of a reverse mortgage loan.
4. Fill out the application: The 1009 form is required to apply for most reverse mortgages. The reverse mortgage application process takes between 30 and 45 days.
5. Hire a HUD-approved appraiser: You need an appraisal to determine your home’s current market value. After you complete the initial application and submit a signed HECM Counseling Certificate, you must pay for an independent HUD-approved appraisal. An underwriter then reviews your application and sets a closing date if everything is in order.
6. Close on the loan: At closing, your loan officer meets with you, an attorney and a notary to sign the documents to finalize your reverse mortgage loan. You have the right to cancel without any penalties within three business days after your closing date — this is known as the rescission period.

After you close on a reverse mortgage

1. Start receiving payments: After the three-day rescission period, you start receiving payment disbursements according to the terms of your reverse mortgage. Funds from HECM and proprietary reverse mortgages can be used for living expenses or whatever else you like.
2. Maintain the property: Once you close on a reverse mortgage, it’s essential to maintain the property to avoid going into default. You’re responsible for maintaining the home (including making any necessary home repairs) and keeping up with property taxes, homeowners insurance and homeowners association fees.

   You can opt into a lifetime expectancy set aside (LESA), which dedicates a portion of your reverse mortgage funds to pay for future taxes and premiums for a period of time. According to the National Reverse Mortgage Lenders Association (NRMLA), LESA can fund property taxes, homeowners insurance and flood insurance, but it can’t fund homeowners association dues or condominium fees.

3. When the loan becomes due: As long as the terms of the reverse mortgage are met, the loan only has to be repaid when the borrower dies or permanently moves from the residence. Reverse mortgages are nonrecourse loans, meaning that the lender can seize the collateral if the borrower defaults. Still, the borrower (or heir) is not responsible for additional compensation, even if the collateral doesn’t cover the full balance of the debt. Heirs have the option to pay back the reverse mortgage, usually through refinancing. Otherwise, the lender seizes the collateral property to settle the loan.

We’ve compared the best local reverse mortgage companies across the U.S. to help you find trusted lenders in your city.

• Bakersfield
• Baltimore
• Boise
• Buffalo
• Cincinnati
• Cleveland
• Denver
• Detroit
• Fort Myers
• Green Bay
• Indianapolis
• Kansas City
• Lansing
• Las Vegas
• Milwaukee
• Nashville
• Omaha
• Phoenix
• San Diego
• Tallahassee
• Tampa
• Tucson
• Waco
• West Palm Beach

Company name Contact Proprietary reverse mortgages from Finance of America Reverse are best for homeowners with enough equity in a high-value property to leverage a more substantial loan amount.

Logo Summary PROS Experienced loan officers Wide selection of loan options CONS Limited availability for some programs

Finance of America Reverse offers reverse mortgages, second mortgage and loan refinancing products to eligible borrowers nationwide. FAR specializes in proprietary reverse mortgages through the HomeSafe program. Available in 22 states, HomeSafe is a “second-lien” reverse mortgage that allows homeowners who already have low fixed rates to keep their terms and still tap into their equity through a second mortgage.

The program has similar requirements to a government-backed reverse mortgage but with higher loan limits up to $4 million, which qualifies as a jumbo reverse loan. Also, FAR’s HomeSafe program doesn’t require you to pay mortgage insurance premiums.

Company name Contact A HECM loan from AAG is best for someone in retirement who needs extra cash flow to supplement their regular income or cover unplanned life expenses.

Logo Summary PROS Accessible loan specialists Free educational resources CONS Few physical locations

American Advisors Group offers a variety of reverse mortgage loan products, including home equity conversion mortgages (HECM), HECM for Purchase and refinancing loans. Each client is assigned a dedicated loan officer who helps them through the whole process, from scheduling an appraisal to submitting your application for underwriting review. You may have the option to roll upfront costs and fees into the principal, which is due when the rest of the loan is due.

All of AAG’s reverse mortgage professionals are required to pass federal and state tests to get their licenses through the National Mortgage Licensing System. AAG is licensed to provide reverse mortgages in almost every state, though it currently only has physical branch locations in California, Hawaii, New York, Georgia, Missouri and Texas.

Company name Contact A HECM for Purchase loan from Liberty is best for someone who wants to move to a property better suited to aging in place while also obtaining a reverse mortgage.

Logo Summary PROS Pricing Promise guarantee Excellent customer service CONS Doesn’t service all loans

Liberty Reverse Mortgage offers HECM and HECM for Purchase loans. Liberty’s Pricing Promise guarantees fair and competitive prices — if you find a competitor with better rates or terms, Liberty will match them or send you a $100 gift card if it can’t. HECM for Purchase origination fees are capped at 2% on the first $200,000 and 1% of any amount more than $200,000, up to $6,000.

Liberty clients also get access to a free reverse mortgage calculator. You can find Liberty Reverse Mortgage in Arizona, Arkansas, California, Colorado, Florida, Massachusetts, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Virginia and Washington.