Find the Best Reverse Mortgage Lenders

To understand the basics of what a reverse mortgage is and how it works, you need to grasp the concept of home equity. Equity is the difference between your home's fair market value and the balance of your loan on the property. Think of your equity as the percentage of your home that you’ve already paid for.

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

With a reverse mortgage, you can 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. This causes your mortgage balance to increase over time through a process called negative amortization (negative amortization also happens if you don’t pay enough interest on a home loan).

The title of your house stays in your name, and your lender uses the property as collateral against the reverse mortgage loan. Reverse mortgages are non-recourse loans, so lenders can’t demand more than the home is worth.

In other words, you can’t owe more than your home is worth when the loan becomes due. Additionally, if the property is sold for more than the debt on the loan, the borrower’s estate is entitled to the surplus.

Generally, the amount you can access through a reverse mortgage is determined by the age of the youngest homeowner, the current value of your property, the balance on your current mortgage loan and your interest rates.

Reverse mortgage eligibility requirements

Not just anyone can get a reverse mortgage, so make sure you meet all the criteria. To be eligible for a reverse mortgage, you must be at least 62 years old and own a substantial part of your home. 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.

There are no particular income or minimum credit score requirements for reverse mortgages, but you probably won’t qualify if you have outstanding federal debts. The property you take a reverse mortgage out against must be your primary residence. To meet HECM property requirements, you must live in a single-family home or a two- to four-unit property. You must also meet certain FHA requirements:

• Your name (and an eligible spouse, if applicable) must be on the loan
• You must have a high amount of equity in your house
• You can’t have any delinquent federal debts
• The home must be up to property standards (including flood requirements)

Additionally, most lending companies require that your first lien is settled before disbursements begin. Liens are a claim against your property to secure a debt. You can get a reverse mortgage if you have mortgage debt, but your reverse mortgage must be in the first lien position.

Types of reverse mortgages

The three types of reverse mortgage products are home equity conversion mortgages (HECMs), single-purpose reverse mortgages and proprietary reverse mortgages. The kind that’s right for you depends on your financial needs and retirement goals.

• Home equity conversion mortgage: A HECM (pronounced “heck-um”) is offered through FHA reverse mortgage lenders and backed by HUD. Unlike a single-purpose reverse mortgage, HECM proceeds can be used for whatever purposes the borrower wants, including living expenses or home repairs. The FHA capped the maximum HECM lending limit at $822,325 in 2021. HECM loans have a 95% market share of the reverse mortgage industry.
  • HECM for Purchase: A HECM for Purchase loan leverages a borrower’s existing equity to finance a new house, often to downsize, move closer to family or transition into a retirement community. A HECM for Purchase doesn’t require monthly loan payments, but it does 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 have to pay just one set of loan closing costs.
• Single-purpose reverse mortgage: Single-purpose reverse mortgage proceeds can be used for lender-approved purposes, 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. Local governments and nonprofits that offer these don’t charge origination fees, and the closing costs are minimal. According to the Federal Trade Commission, single-purpose reverse mortgages are the least expensive reverse mortgage type, but they aren’t available everywhere.
• Proprietary reverse mortgage: Wholesale reverse mortgage lenders offer proprietary reverse mortgage loan amounts up to $4 million. Proprietary reverse mortgages, sometimes called jumbo reverse mortgages, aren’t insured by the government. Since they’re not as heavily regulated by the federal government, proprietary reverse mortgages have different rules regarding nonborrowing spouses by state, and funds might affect some government assistance programs.

Reverse mortgage payout options

Reverse mortgage borrowers can select how frequently they receive their proceeds. Depending on the type of reverse mortgage you choose, you can get funds in a lump sum, in fixed monthly installments or through a line of credit. The older the borrower is, the more of the equity they can access, which makes reverse mortgages popular among older retirees.

• Lump-sum payments: Lump-sum payments come all at once in a single disbursement. Lump-sum amounts are most commonly used in HECM for Purchase reverse mortgages.
• Fixed monthly payments: Fixed monthly payments are disbursed regularly. If you opt in for 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 10 years. Tenure payments are received as long as the home is the borrower’s primary residence.
• Lines of credit: A line of credit lets borrowers access funds as needed. The line of credit grows over time, but borrowers don’t earn interest.

Before you can know if a reverse mortgage is right for you, it helps to understand your options and the typical fees. Keep in mind that the real cost of your reverse mortgage is determined by several factors, including your lender, loan terms, interest rate changes and the timing of payout distributions.

Upfront reverse mortgage fees

The upfront costs associated with a reverse mortgage include fees, charges for services and your initial mortgage insurance premium.

• Counseling fee: Mandatory counseling with a HUD-approved third-party HECM counselor typically costs around $125.
• Appraisal fee: Professional home appraisals are required for HECMs. The process is similar to the kind of home inspection you need to sell a property. Average home appraisal costs range from $300 to $500.
• 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. Reverse mortgage closing costs average between $600 and $2,000 but vary depending on the type of loan and your state of residence. Eligible homeowners have the option to pay closing fees upfront or bundle closing costs into their reverse mortgage loan.
• Mortgage insurance premium: Initial mortgage insurance premiums (MIP) cost up to 2% of the loan amount and are due at loan closing.

HECM lending limits are
$822,325
in 2021

Ongoing reverse mortgage costs

Even though you receive payments after you close on a reverse mortgage loan, there are still additional costs to consider. Annual mortgage insurance premium payments are typically between 0.5% and 1% of the outstanding mortgage balance. Homeowner’s insurance is also required, and companies require flood insurance in some areas.

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.

You also must continue to pay property taxes when you take out a reverse mortgage and 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 or not keeping the property in good condition.

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

If you’re eligible for a reverse mortgage and decide it’s the right move for you and your family, the next thing to do is find out exactly how much equity you have in your home. An appraisal is required to determine your home’s current fair market value, and you can see how much you owe on your house on your monthly mortgage statement.

After you complete the initial application and submit a signed 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.

As of publication, the three top-rated reverse mortgage companies are Finance of America Reverse (FAR), Liberty Reverse Mortgage and American Advisors Group (AAG).

We used our proprietary algorithm to rank lenders by their overall customer satisfaction ratings. These ratings are determined using a time-based weighted average numerical calculation of the ratings submitted by buyers over the last year. These ratings are based on a scale of one (1) to five (5), with five (5) being the highest.

Methodology: We started with our list of the most popular reverse mortgage companies in 2021. Some, but not all, of the companies we considered participate in our Accreditation Program. To select our top three picks, we ranked the reverse mortgage companies by overall customer satisfaction rating.

1. We started with a list of the top 10 reverse mortgage lenders. The ConsumerAffairs research team vetted 10 of the most popular reverse mortgage companies to confirm that each company offers appropriate products and services. Some, but not all, of the companies we considered participate in our Accreditation Program.
2. We ranked the companies by overall customer satisfaction from the last 12 months. Using a proprietary algorithm, we ranked the top-rated companies by overall customer satisfaction ratings. These are determined using a time-based weighted average numerical calculation of the ratings submitted over the last year.
3. We analyzed data from more than 760 verified customer reviews. Once we calculated our picks for the top reverse mortgage lenders, we analyzed their most recent reviews and ratings. This information was used to determine what we think each company is best for.

Company name Contact Accredited Partner

Logo Summary Wholesale reverse mortgage lender Good customer service Wide selection of loan options Read reviews

Finance of America Reverse is a wholesale lender that offers reverse mortgages, including HECM and HECM for Purchase, second mortgages and loan refinancing to homeowners. As of publishing, Finance of America is the top-rated reverse mortgage lender on ConsumerAffairs. The company has an overall satisfaction rating of 4.6, based on 303 votes submitted over the last year.

What to consider: FAR specializes in proprietary reverse mortgages through the HomeSafe program. Available in 22 states, HomeSafe is a second-lien reverse mortgage that lets homeowners who already have low fixed rates keep their terms and still tap into their equity.

What we like: Those who rated FAR highly often mentioned how the company’s representatives made them feel comfortable through the whole process and answered all their questions. Those who recommend the company to a friend also frequently express satisfaction with their interest rates and terms.

Proprietary reverse mortgages from Finance of America Reverse are good for homeowners with enough equity in a high-value property to leverage more substantial loan amounts. The HomeSafe program has similar requirements to a government-backed reverse mortgage but has higher loan limits (up to $4 million), so it qualifies as a jumbo reverse loan. Also, FAR’s HomeSafe program doesn’t require you to pay mortgage insurance premiums.

Company name Contact Accredited Partner

Logo Summary Wholesale reverse mortgage lender Helpful loan officers Specializes in HECM Read reviews

As of publishing, Liberty Reverse Mortgage has an overall customer satisfaction rating of 4.4, based on 267 customer experiences submitted over the last year.

What to consider: According to positive reviews, the application and underwriting process takes between four and six weeks. However, customers also reported that the process can take longer — in some cases, three months or more. Some negative reviews from 2020 seem to have to do with delays related to COVID-19. For example, there was at least one delay in scheduling an appraisal.

What we like: Customers who told us they would recommend Liberty to a friend often also mentioned the loan officers were “very nice” and “helpful.” People seem to like that the company’s representatives take time to answer all questions throughout the application and underwriting processes. A HECM for Purchase loan from Liberty Reverse is good for someone who wants to move to a property better suited to aging in place while also obtaining a reverse mortgage.

Company name Contact Accredited Partner

Logo Summary Accessible loan specialists Free educational resources Offers jumbo reverse mortgages Read reviews

American Advisors Group offers a variety of reverse mortgage loan products and services, including home equity conversion mortgages, HECM for Purchase and refinancing loans. As of publishing, AAG has an overall satisfaction rating of 4.6, based on 203 customer experiences over the last year.

What to consider: 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. You may have the option to roll upfront costs and fees into the principal, which is due with the rest of the loan.

What we like: A HECM loan from American Advisors Group is good for someone in retirement who needs extra cash flow to supplement their regular income or cover unplanned life expenses. Each new client is assigned a dedicated loan officer who helps them through the entire process, from scheduling an appraisal to submitting their application for underwriting review. 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.

If you’re considering a reverse mortgage, here are some key takeaways to keep in mind:

• Put the house in both spouses’ names: In most scenarios, it’s ideal if the people listed on the title also sign for the reverse mortgage. If you’re married, your spouse must consent to the reverse mortgage but is not legally required to sign on as a borrower. However, this can create problems down the road. For instance, the surviving spouse could lose the property if the primary borrower passes away and the loan is due.
• Understand how interest accumulates: With a reverse mortgage, interest payments on the loan are deferred but still accumulate. Just like traditional mortgages, reverse mortgages can have fixed or adjustable interest rates. Adjustable interest rates are sometimes called variable interest rates because they change over time. Furthermore, interest on reverse mortgages is not tax deductible.
• Know when the loan is due: As long as the terms of the reverse mortgage are met, the loan has to be repaid only when the borrower dies or permanently moves from the residence. Reverse mortgages are nonrecourse loans, meaning the lender can seize the collateral if the borrower defaults. However, the borrower (or heir) is not obligated to pay 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 puts a lien on the property to settle the loan.
• Remember you have rights: You have the right to cancel without any penalties within three business days after your reverse mortgage closing date — this is known as the rescission period. The Truth in Lending Act (TILA) requires lenders to provide a Good Faith Estimate (GFE) that itemizes all reverse mortgage service fees. Lenders must disclose your total annual loan cost (TALC), which is similar to how standard mortgage lenders must disclose the annual percentage rate (APR).

• 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