Best Reverse Mortgage Companies of 2023
With rising housing prices and a population that has put away little for retirement, it is no surprise that reverse mortgages are becoming more popular. These loans are lauded as the best thing since sliced bread, but the truth is that there are plenty of scams and shady practices, even among the most widely advertised lending firms.
The reviews of the reverse mortgage companies that you’ll find below are our way of shining some light on the firms that are most deserving of praise. They represent the culmination of detailed research and hard work that went into testing the services of these companies, with all the good and not-so-good features exposed for you to see.
But that is not all that you will find here.
There are many misconceptions about these loans. Banks don’t make it clear how they can affect your life in both positive and negative ways. We, therefore, spell out the facts about the benefits and pitfalls of reverse mortgage loans.
Top Reverse Mortgage Lenders for November 2023
American Senior stands out from the competition due to its streamlined, online, and fully paperless application process. This experienced provider also offers excellent customer support. Read Review
- •Loans up to $4 million
- •Fast online application
- •Several payment options
AAG is the largest reverse mortgage lender in the US. This is a company with nationwide coverage and hundreds of experienced employees who keep it at the very top of what the market has to offer. Read Review
- •Free online loan calculator
- •High customer trust
- •Experienced loan originators
With Ivy League leadership and investments from Federal Reserve veterans like Alicia M. Munnell, Longbridge Financial is slowly but surely becoming one of the leading reverse mortgage companies in the US. Read Review
- •No first-year withdrawal limits
- •Transparency with fees and costs
- •Free identity theft protection
Finance of America Reverse is easily one of the top reverse mortgage lenders in the US, with a solid selection of loans and a clear focus on live interaction with experienced mortgage specialists. Read Review
- •Loans of up to $4 million
- •Experienced loan originators
- •High customer satisfaction
Liberty Reverse Mortgage is not just another lender among many. It is a company with an offer that can effortlessly match the ones from other reputable reverse mortgage companies - and a level of customer trust that’s rarely found among its competitors. Read Review
- •Free online resources
- •Great customer support
- •Liberty Iron Clad guarantee
LendingTree is a good choice for potential borrowers who are looking to compare multiple reverse mortgage providers. The quality of service here is so good that even though the company is not a direct lender, it still deserves to be listed among the industry leaders. Read Review
- •Good for comparing rates
- •Easy to use and accessible
- •Provides the fastest way to get contacted by lenders
Homebridge is effectively a generational lender, providing reverse mortgage loans for every stage of life. With a huge variety of loans and nationwide coverage, there is something for everyone here. Read Review
- •Loans of up to $5 million
- •Provides a wealth of helpful information
- •Variety of HECM loans
Best Reverse Mortgage Lenders in 2023:
- American Senior - Quick and online approval process
- AAG - Experienced loan originators
- Longbridge Financial - HELO reverse mortgage option
- Finance of America Reverse - High customer satisfaction
- Liberty Reverse Mortgage - Unique guarantee system
- LendingTree - Fastest way to get contacted by lenders
- Homebridge Financial Services - Variety of HECM loans
Detailed Reviews of Reverse Mortgage Companies
American Senior ReviewLearn More
On Official Website
American Senior Review
- • Loans up to $4 million
- • Fast online application
- • Several payment options
American Senior has been the trusted go-to reverse mortgage company for many people since 2007. This company has some of the most trustworthy reverse mortgage offers on the market, excellent customer support, and one of the easiest online application processes available.
American Senior’s selection of reverse mortgages on offer is excellent and will effortlessly cover most people’s needs. Anyone over the age of 63 that has equity in their home can apply for its standard HECM, reverse mortgage refinance loans, or HECM for purchasing a second home. It also offers some extraordinary Jumbo loans, allowing seniors to take up to $4,000,000.
The website features a mortgage calculator, which will allow you to quickly estimate the size of the loan you’re eligible for with this reverse mortgage provider. All you have to do is type in the estimated value of your home together with the mortgages and liens you already have on it, and you’ll get all the details you need.
Of course, with any of these loans, you still maintain the ownership of the home, and there are $0 monthly mortgage payments required on the money you use from these mortgages.
Pricing & Discounts
When it comes to fees and pricing, you’ll quickly notice that the American Senior’s website isn’t transparent on this topic at all. It’s not surprising, as the site’s goal is for you to contact them, which is a common practice among reverse mortgage brokers. By giving their customer representative team a call, you can get accurate quotes and prices.
The same applies to discounts and special offers - you’ll have to get in touch to get the most up-to-date information about those.
In terms of customer experience, American Senior should most certainly re-evaluate the informativeness of its website. While it clearly lists all of the reverse mortgages on offer, the road to actual information you need is a long and tedious one. It asks you for a lot of personal information through a simplistic form on the site, just to take you to a calculator.
Just like with other reverse mortgage providers, the calculator proves to be effective to a point, as it will give you a decent estimate of what lies in store. However, for any accurate information, you’ll have to give them a call.
Luckily, its agents are very friendly and helpful, so it won’t be a stressful experience. They will guide you through the process and provide all the necessary information you might need to turn home equity into a much more enjoyable retirement.
All in all, American Senior is one of the most trustworthy reverse mortgage lenders around. With an excellent selection of reverse mortgage types, friendly and supportive agents, it could be the solution for anyone looking to enjoy their retirement in exchange for home equity.
At a Glance
- Loans up to $4 million
- Fast online application
- Several payment options
American Advisors Group ReviewLearn More
On Official Website
American Advisors Group Review
- • Free online loan calculator
- • High customer trust
- • Experienced loan originators
AAG was founded in 2004 by Reza Jahangiri in Orange County, California, to help homeowners aged 62 and older live a more financially stable life in retirement. Since then, the company has become the largest reverse mortgage lender in the US, the only one operating in all states nationwide. With a market share of 32.22% as of October 2020 and multiple awards - including BBB’s Torch Award for Ethics in December 2017 - AAG has proven it belongs right at the top.
American Advisors Group is a powerhouse in the reverse mortgage industry, so it is not surprising that it offers an extensive list of loans. The most common HECM reverse mortgage can be signed on an adjustable or fixed rate, with a maximum home value of $679,500. There is also the HECM for purchase loan, which lets senior homeowners buy a new home and make a reverse mortgage purchase in the same transaction, all while paying only one set of closing costs.
The AAG Reverse Mortgage Finance loan is designed for refinancing your existing reverse mortgage with a better interest rate and access to increased equity due to appreciating property value. There is also a Single-Purpose Reverse Mortgage that can cover issues like property taxes and house repairs.
AAG is one of several reverse mortgage lenders on our list that feature Jumbo loans. With limits as high as $4 million, AAG is ideal for homeowners with substantial home equity. These Jumbo Reverse Mortgage loans are backed by banks and private lending firms. That means that the FHA does not insure them, so it is best to be as prepared and as informed as possible.
Pricing & Discounts
This is the one place where AAG does not offer anything out of the ordinary - and where it has plenty of room to grow. The only real perk in terms of pricing is that the company will not charge you a service fee throughout the entire duration of a HECM loan. AAG also does not advertise any rebates, maximum caps, or price matching, so you have to contact them for an estimate.
The fees are divided into those that you pay upfront and those that are rolled into the loan. Like other reverse mortgage companies that provide HECMs, AAG charges loan origination fees of $2,500 to $6,000 depending on the value of your house. The insurance stays at a government-mandated 2% of your loan amount.
Title insurance varies by region, but other than that, you can expect to pay about $1,000 on all the other fees: courier charges, appraisals, credit reports, surveys, pest inspections, and other costs.
AAG is the largest of all the reverse mortgage lenders, and it has an outstanding record when it comes to customer satisfaction. BBB gives the company a B rating, with most reviews praising fast closings and experienced employees. The company website makes it easy to find valuable information, but there are few online tools for borrowers other than a mortgage estimate calculator.
American Advisors Group’s customer service is world-class. You can expect to speak to highly professional and knowledgeable support staff, and there is a detail-packed FAQ on the website too.
AAG is not only the largest but also one of the top companies for reverse mortgage loans. This is a world-class organization with nationwide coverage and hundreds of experienced employees. It is sure to remain a top contender for years to come.
At a Glance
- Free online loan calculator
- High customer trust
- Experienced loan originators
Longbridge Financial ReviewLearn More
On Official Website
Longbridge Financial Review
- • No first-year withdrawal limits
- • Transparency with fees and costs
- • Free identity theft protection
This New Jersey reverse mortgage lender has been operating since 2012. It has a positive reputation for the quality of its online service, which is almost unmatched on the market.
Longbridge Financial offers a wide range of HECM loan options while also providing its own proprietary loan called Longbridge Platinum. For standard HECMs, you have adjustable and fixed-rate options for lump-sum or term disbursement, along with tenure and line-of-credit reverse mortgages.
The Longbridge Platinum proprietary loan has a maximum amount of $4 million. Like other Jumbo Reverse mortgages, it is not backed by the FHA. It is not available in all states, though, so check with the company if your state is supported.
This Platinum Jumbo loan was meant as the first in a line of options that Longbridge will offer customers in the near future, so you may soon find the company making even bigger home loans. These non-FHA loans put all the responsibility on the borrower for the full amount of the loan when it comes due, so it is best to approach them with complete knowledge and plenty of preparation.
It does offer some of the lowest mortgage rates and fees, but you’d best know what you are getting into.
Pricing & Discounts
Longbridge Financial does not stand out from the competition when it comes to pricing, as it follows industry trends for both the proprietary mortgage and government-mandated fees regarding HECM loans. The origination fee is limited to $6,000, and the mortgage insurance rate premium is the standard 2%. Other closing costs and fees are also on par with industry norms.
What it lacks in discounts and information regarding reverse mortgage fees, Longbridge more than makes up for with the quality of service. The website is probably the best-designed one on our list, and the Longbridge reverse mortgage calculator is the most robust tool of its kind in the entire industry. Details like this cement Longbridge’s place among the top reverse mortgage companies.
Longbridge’s customer guarantee includes a pledge to inform people if a reverse mortgage is not the right option for them financially, plus a promise to try to close every mortgage within 45 days of receiving the application and the use of a HUD-approved counseling certificate. With such great dedication to customer service, it is no surprise that the company holds an A+ rating from the BBB and a phenomenal 4.6 out of 5 stars on ConsumerAffairs.
With Ivy League leadership and investments from Federal Reserve veterans like Alicia M. Munnell, Longbridge Financial LLC is slowly but surely becoming one of the most respected reverse mortgage lenders in the US. The company already operates across most US states, has an impressive website and even better customer service.
All of this more than makes up for the lack of openness regarding mortgage fees.
At a Glance
- No first-year withdrawal limits
- Transparency with fees and costs
- Free identity theft protection
Finance of America Reverse ReviewLearn More
On Official Website
Finance of America Reverse Review
- • Loans of up to $4 million
- • Experienced loan originators
- • High customer satisfaction
Operating since 2003 (known as Urban Financial of America back then), Finance of America has become one of the premier reverse mortgage firms in the US. The Oklahoma-based company operates in 43 states and Puerto Rico. It is a member of NRMLA, the National Reverse Mortgage Lenders Association.
There are two major reverse mortgage solutions at Finance of America Reverse LLC. The most popular is the HECM loan, which is available in all 50 states and Puerto Rico. The limit on the HECM loan is $636,150, or the value of the home, whichever is lower.
The other option targets homes with values that are higher than the limits for HECM loans. Finance of America calls this proprietary Jumbo loan HomeSafe Reverse Mortgage. It allows homeowners to borrow up to $4 million. HomeSafe loans are not federally insured like HECM loans are, but they do qualify as non-recourse loans.
This Jumbo loan includes mortgage insurance premiums, making the total cost of the reverse mortgage loans lower. The downside with HomeSafe is that the government does not cover the excess loan value of the home after it is sold. Unlike HECM reverse mortgages, however, the borrower or heirs will be responsible for the difference.
Whichever option you choose, you can expect Finance of America to close the loan within 30 days in most cases.
Pricing & Discounts
When it comes to pricing, Finance of America Reverse shows a level of versatility that you simply cannot find with other lenders. The company provides five versions of its HomeSafe proprietary reverse mortgage loan, the widest variety of options you’ll find anywhere.
The HomeSafe loan comes in Standard, Flex, For Purchase, Second, and Select versions, with the biggest difference being how funds are disbursed. HomeSafe Standard and Second are built for lump-sum payments, while the HomeFlex loan is for those who are willing to pay 60% of the loan upfront, with the remaining 40% paid out over the next five years.
Finance of America allows you to close the loan without any out-of-pocket costs, depending on your financial situation. Origination fees will cost you between $2,500 and 6,000, while reverse mortgage interest rates can be fixed or variable.
Finance of America Reverse follows a traditional path in customer service, with a preference toward mail and loan originators who will guide you through the process on the phone. The contrast with an ever-more-online industry is obvious; it is not surprising that the company has an A+ rating with the BBB and just 57 complaints on the Consumer Financial Protection Bureau website.
It also sets itself apart from other companies with a website that makes it easy to access valuable learning resources while also providing helpful articles about retirement living. There is even a retirement personality quiz to help you decide the product best suited to your needs, plus an excellent reverse mortgage calculator that provides very detailed projections for various loan options.
In our opinion, Finance of America Reverse provides the highest quality of service in the reverse mortgage loan market. It is a company that does its best to make sure you find a loan that is best suited to your needs, and even though there are some quirks here and there (such as having to give up a lot of personal information to calculate your potential reverse mortgage), it is definitely one of the top reverse mortgage companies around.
At a Glance
- Loans of up to $4 million
- Experienced loan originators
- High customer satisfaction
Liberty Reverse Mortgage ReviewLearn More
On Official Website
Liberty Reverse Mortgage Review
- • Free online resources
- • Great customer support
- • Liberty Iron Clad guarantee
Established in 2004, Liberty Reverse Mortgage, formerly known as Liberty Home Equity Solutions Inc., is one of the biggest reverse mortgage lenders in the US. The company operates in 49 states and has given out more than $7.5 billion to more than 60,000 senior homeowners.
While most lenders feature a variety of home loans, Liberty Reverse Mortgage is wholly focused on reverse mortgages. For the longest time, the company offered only two HECM loans: standard HECM and HECM for purchase. Lately, Liberty has started rolling out a proprietary mortgage service to keep up with the other reverse mortgage companies, so you can probably expect to see a Liberty Jumbo loan offer in your state in the near future.
A standard HECM loan can be used to pay off existing debts or boost your retirement savings, while HECM for purchase loans are available to buyers of single-family homes and FHA-approved condominiums and manufactured homes. You can choose a lump sum, monthly disbursement, or line-of-credit reverse mortgage, and you can expect your HECM loan to be closed in 30 to 45 days after signing.
Pricing & Discounts
Closing costs and some fees vary depending on your state, but other reverse mortgage requirements and costs are set in stone by HUD and FHA regulations. The origination fee is capped at $6,000, and mortgage insurance is at $13,593. Liberty’s title, settlement, and closing costs follow industry norms.
However, what makes Liberty Reverse Mortgage loans stand out from the competition is the company’s Iron Clad Guarantee. It can save you money on fees - and even get you better terms - if you work directly with the company instead of one of its affiliated partners.
This is one of the fairest reverse mortgage deals you can find, as Liberty promises to beat or match a competitor’s reverse mortgage offer and close the loan in 60 days or give you a $100 Visa gift card. If more than 60 days pass before Liberty Reverse Mortgage closes the loan, the company will also reduce closing costs by $500 - but this discount applies only to HECM standard loans.
You can complete the entire application process from your home, changing your mind or stopping any time before the loan is funded.
Liberty Reverse Mortgage holds an impressive A+ rating with the Better Business Bureau, with no active complaints at the moment, and three out of five stars, which is fantastic for BBB. It is also highly rated on ConsumerAffairs, with 4.3 out of 5 stars, making it one of the top reverse mortgage companies in terms of customer satisfaction.
The company’s website is simple to use, with most of the important information just a click away. It is not a particularly flashy site, but it does not need to be.
If you are working directly with Liberty Reverse Mortgage and the Iron Clad Guarantee, a team of experts will guide you through the loan process and update you weekly. You can call an agent during business hours with questions.
Liberty Reverse Mortgage is not just another reverse mortgage lender. It is a company with a unique guarantee and a level of customer trust rarely found among other lenders.
At a Glance
- Free online resources
- Great customer support
- Liberty Iron Clad guarantee
LendingTree ReviewLearn More
On Official Website
- • Good for comparing rates
- • Easy to use and accessible
- • Fastest way to get contacted by lenders
LendingTree.com was established in 1996 in North Carolina. It has been a licensed online mortgage broker since 2013. The company serves as a loan aggregator that helps borrowers connect with home loan and reverse mortgage providers to compare offers side-by-side. It is a true one-stop-shop for any kind of loan.
LendingTree is a famous marketplace for financial loans of all types, and it partners with some of the leading reverse mortgage lenders in the US. This approach makes LendingTree a unique player, as the company itself is not a lender. It is, instead, the best place to compare the rates from all the lenders on the market. It also ensures that borrowers are contacted by lenders, which is great if you are not bothered by calls and emails from multiple companies.
Some of the lenders that you will find on Lending Tree are American Advisors Group (AAG), Community First National Bank, Finance of America, Live Well Financial, Responsible Reverse Mortgage, Ruoff Mortgage Company, and United Mortgage Corporation.
Pricing & Discounts
LendingTree isn’t a reverse mortgage company, so it won’t charge you directly for anything. It makes its money from selling the reverse mortgage loan to third parties, meaning that your costs are determined by the lender that you choose. What’s more, LendingTree does not allow any of its lenders to charge upfront fees to guarantee or insure a loan.
Because of how LendingTree works, the quality of its service has to be the whole focus of the company’s website. And it really does an excellent job with that, providing an easy-to-use interface with an extensive supply of tools and resources for customers interested in finding the reverse mortgage lenders that best suit their needs.
The biggest issue that Lending Tree currently has is that it cannot actually control how partner lenders will treat borrowers coming from the LendingTree website. Therefore, any issues with employees from those companies will reflect poorly on the broker. Even so, LendingTree has a positive rating from its customers, with 82% of them giving the company an “excellent” rating on TrustPilot.
The Better Business Bureau also rates LendingTree highly with an A+ rating, while ConsumerAffairs gives it 4.6 and its readers 3.9 out of 5 stars.
LendingTree.com is an excellent choice for borrowers looking to compare reverse mortgage providers and find the one best suited to them. The quality of service is so solid that even though the company is not a direct lender, it still deserves to be listed among the industry’s leaders.
At a Glance
- Good for comparing rates
- Easy to use and accessible
- Fastest way to get contacted by lenders
Homebridge Financial Services ReviewLearn More
On Official Website
Homebridge Financial Services Review
- • Loans of up to $5 million
- • Provides a wealth of helpful information
- • Variety of HECM loans
Homebridge Financial Services Inc. was founded in 1989 with the idea of becoming a “generational lender” that can provide you with loans at any stage of your life: from your very first loan all the way to a refinance reverse mortgage to fund your retirement. In 2016, the company acquired Prospect Mortgage and became one of the largest non-bank lenders in the US.
Homebridge Financial focuses on HECM mortgages and features a great range of loan options. The company provides reverse mortgages for single-family homes, condos, townhouses, and manufactured homes that meet FHA requirements. What’s more, like other top reverse mortgage lenders, Homebridge is also a nationwide firm, meaning that you can apply for a reverse mortgage in any US state.
You can choose a tenured loan, line of credit, or HECM for purchase loan, with fixed-rate lump-sum disbursement or adjustable-rate term disbursement. There is also an option for Jumbo and Super Jumbo loans.
Pricing & Discounts
Homebridge is a pure HUD reverse mortgage lender that focuses only on government-insured loans, so costs like origination fees and reverse mortgage insurance premiums are tightly regulated and must follow industry standards. The reverse mortgage limit for HELOC at Homebridge is $300,000, but Jumbo loans can go all the way to a staggering $5 million. Origination fees are typically under the $6,000 limit.
The company requires you to pay the mortgage insurance premium upfront, while expenses like appraisals and inspection fees can be rolled into the borrowed amount. Homebridge Financial Services does a good job of explaining just how much each of these expenses and fees will cost you, and all of these details are available right on the website.
The quality of customer service does not end with transparency about prices and reverse mortgage interest rates, either. The fact is that Homebridge has one of the most comprehensive websites out there, with a treasure trove of useful information to help you understand reverse mortgages better. And if you have any trouble finding the things you are looking for, you can always contact the helpful support staff.
It is not surprising, then, that Homebridge Financial customer service receives good reviews online and has 4.2 out of 5 stars on ConsumerAffairs. The company also has a B+ rating from the BBB and is considered to be financially stable.
Even though Homebridge Financial has only been in the reverse mortgage business for a few years, the wealth of experience that the company has amassed is evident. This service was the last remaining piece of the puzzle to complete Homebridge’s goal of being a lender that can serve you in all stages of your life, and we can confirm that it has succeeded.
Some quirks and issues with more up-to-date information on the website aside, Homebridge is easily among the top reverse mortgage companies in the US.
At a Glance
- Loans of up to $5 million
- Provides a wealth of helpful information
- Variety of HECM loans
A Detailed Guide to Reverse Mortgages
Before commiting to a reverse mortgage loan, it is crucial to understand the ins and outs of reverse mortgages.
What is a Reverse Mortgage?
Reverse mortgages are also known as home equity conversion mortgages. They are home loans for homeowners that are 62 or older. The first reverse mortgage purchase in the US was in 1961. The loan was taken out by a borrower named Nellie Young in Portland, Maine.
In 1969, the concept caught the eye of the Senate Committee on Aging, but it was not until 1983 that the Senate finally approved a proposal by Senator John Heinz to have reverse mortgages insured by the Federal Housing Administration.
These loans were designed to allow older homeowners who had acquired equity over the years to tap into it and have the best reverse mortgage lenders make payments to the borrower. HECM reverse mortgages are insured by the FHA. This means that even when the estimated value of a house drops after a loan is signed, the FHA will always cover the difference in the outstanding debt.
Requirements for Getting a Reverse Mortgage
Not every person or every property is eligible for a reverse mortgage loan, and certain requirements need to be met before you can apply for a HECM mortgage. They include the following:
- The youngest borrower on the home’s title must be at least 62 years old. (Some non-FDA approved types of reverse mortgages lower the minimum age to 60.) A reverse mortgage loan will never apply to any spouse or family member who was younger than that at the time of signing.
- The borrower must live in the home as a primary residence for the entire duration of the reverse mortgage loan. Vacation homes and rental properties are not eligible.
- The borrower has to own the home or have at least 50% equity in it. It is also possible to be eligible for a reverse mortgage if you have a low existing mortgage, in which case the funds from the HECM would first be used to pay it off before you could use them for other purposes.
- The borrower must meet with a Department of Housing and Urban Development mortgage counselor before applying for the loan.
- Family Homes: Single-family homes are eligible for reverse mortgage plans, but borrowers can qualify even if the property houses multiple families. The home cannot have more than four units, and the borrower has to be living in one of the units as a primary residence.
- Community Properties: Condominiums and townhouses can also receive a reverse mortgage, but in the case of condominiums, the development has to be approved by HUD. Homes in planned unit developments are also eligible, but unlike townhouses, in which major repairs are the obligation of the homeowner’s association, the homeowner himself is responsible for repairs.
- Manufactured Homes: Manufactured houses are those that had pieces of the home built in a factory and later assembled on-site. They are eligible for a reverse mortgage plan if they meet FHA requirements. The manufactured home must have been made after 1976, be attached to a permanent framework, have a floor area of at least 400 square feet, and meet safety and flood standards. The home also must be classified and taxed as real estate.
The borrower has to prove financial ability to meet loan obligations, including paying property-related taxes and insurance, homeowner’s association fees, and home maintenance and repair costs.
Types of Reverse Mortgages
- Single purpose reverse mortgage: These mortgages are offered by certain state and local government agencies and non-profit organizations and may only be used for a single purpose that the lender specifies.
- Proprietary reverse mortgage: These are private loans backed by the companies that develop them and can be used for any purpose or provide more funds if you own a highly valued home.
- Federally insured reverse mortgage (Home Equity Conversion Mortgage or HECM): This is the most common type of reverse mortgage and the one that is backed by HUD. These loans are available only through FHA approved lenders and can be used for any purpose.
Reverse Mortgage Payment Plans
Once your reverse mortgage loan is approved and signed, you can choose how to receive the proceeds.
Single Disbursement Lump Sum
Prior to changes made to the reverse mortgage program a few years ago, borrowers were able to withdraw all of the equity in a single payment, but now the maximum amount that you can obtain during the first year is 60% of the principal amount. The new rule does not apply to existing mortgages and other required payments, where the borrower can withdraw an additional 10% of the principal limit. The remaining balance is available for withdrawal in year two of the loan.
Line of Credit
A reverse mortgage line of credit serves as a safety net that also allows your reserve funds to grow in value. With this option, you have money available to you, but you accrue interest only on the funds you withdraw, while the reserve grows at the same rate as the interest rate on the loan plus 1.25% monthly.
This growth is unique to line of credit reverse mortgages. A line of credit payment option is great if you want to hedge against falling house prices. Your assets will grow even if prices fall.
This payment plan lets you receive equal monthly payments similar to an investment annuity and can go on for as long as you maintain the home as your primary residence, regardless of how high the outstanding balance grows. The term length for a reverse annuity mortgage is calculated by subtracting the age of the youngest borrower from 100 years, but if you happen to live past 100, you will continue to receive payments.
Term payments give you a regular fixed dollar amount from the lender every month for the entire loan term. Monthly payments are calculated by the lender and will not be reduced even if the home decreases in value.
At the end of the term, the borrower is not obliged to pay any of the borrowed funds and can remain in their home as long as they fulfill the obligations under the mortgage terms. These include paying property taxes, home insurance, maintenance costs, and other property charges.
There are also two additional hybrid reverse mortgage payment options worth mentioning. The first combines tenure and line-of-credit plans. It allows the borrower to withdraw less than the maximum monthly payment. The remaining funds get placed into a line of credit, which can prove extremely useful in the event of a sudden expense.
The second hybrid option combines term payments with a line of credit and differs from the first in that the arrangement is set for a fixed period of time. The borrower receives small monthly payments, and the remainder of the funds are available in a line of credit, just like the first hybrid option.
Reverse Mortgage Fees
When you sign a reverse mortgage loan, lenders will charge you various upfront fees and ongoing expenses. These costs of a reverse mortgage will vary depending on the type of mortgage that you take. When you take a HECM mortgage, these are the fees that you can expect to see:
- Appraisal Fee: This fee pays for the appraisal of your home. The reverse mortgage lender hires an appraiser who determines how much your home is worth and, indirectly, how much money you can borrow. Appraisal fees are usually paid out of pocket and vary depending on your region and type of home, but you can expect to pay a few hundred dollars.
- Closing Costs: These fees cover many of the same closing costs associated with traditional first mortgages. Reverse mortgage closing costs are often rolled into the loan amount. Here is a list of closing costs and estimates on how much you should expect to pay:
Credit report fee: $20-50
Document preparation fee: $75-150
Title insurance: Varies by loan amount and region. The more expensive the property, the more you pay for title insurance.
Flood certification fee: $20-30
Escrow fee: $150-800
Recording fee: $50-500
Courier fee: $50
Pest inspection: $100
- Initial Mortgage Insurance Premium: The government charges this fee to cover its guarantee of HECM reverse mortgages. The initial fee for the reverse mortgage insurance premium is 2% of the maximum claim amount, which is usually the appraised value of your home.
- Loan Origination Fees: The lender charges the origination fee to process your loan. The amount you pay will depend on the value of your home, but since HECM mortgages are strictly regulated by HUD and are FDA insured, there are strict caps on how much the lender can charge. For the first $200,000 of property value, the lender can charge 2% or up to $2,500. However, if the house is appraised for more than $200,000, they can charge an additional 1% of the amount over that threshold. For example, if your home is appraised at $400,000, the lender can charge up to $6,000 for an origination fee ($200,000 x 2% + $200,000 x 1%). The maximum for an origination loan fee on a HECM reverse mortgage is $6,000, but this can be exceeded if you’re getting a proprietary reverse mortgage.
- Points: This is an optional upfront fee that you can pay to get a discount on your loan’s interest rate. In exchange for paying points, the lender charges a lower interest rate on your reverse mortgage. You save money in the long run.
- Interest: Because reverse mortgages are loans, you will pay interest. What’s unique about reverse mortgages is that this interest is not paid while living in your home, but only after you move out or pass away. Reverse mortgage rates can be fixed or adjustable. A fixed rate stays the same over the entire duration of the reverse mortgage, while an adjustable rate changes over time based on a market index. If you get an adjustable-rate loan, your reverse mortgage documentation will specify how often the rate can change. If you choose a line of credit reverse mortgage, you will owe interest only when you borrow money through the line of credit and won’t be charged on the unused portion of the money.
- Mortgage Insurance: This fee is paid to the FHA for guaranteeing your loan, and the payment is 0.5% of your outstanding mortgage balance. Reverse mortgage insurance is added to your outstanding loan balance, but it isn’t generally paid while you are still living in your home.
- Servicing Fee: Monthly servicing fees can be charged for managing your loan. The maximum is $30 for fixed or adjustable loans that reset annually and $35 for adjustable loans that reset on a monthly basis.
Benefits of Reverse Mortgage Loans
Senior citizens can use reverse mortgages to cover retirement expenses. Reverse mortgage loans benefit the borrower in four unique ways:
Maintain Ownership of Your Home
The best reverse mortgage lenders never transfer the title or the right to sell your house to the lender as long as you keep paying property taxes and homeowners insurance and maintain the property according to FHA requirements. The house will remain yours until you move out or pass away, and if you move out, you will still have the option to pay off the loan and keep your property.
No Monthly Payments
Unlike a home equity loan that has borrowers paying monthly mortgage payments, a reverse mortgage frees you of this requirement. It gets repaid only after you sell the house, move out of it, or pass away. Before then, there is no need to pay off the loan balance or interest. Reverse mortgages are also considered loans, not income, so your Social Security payments and Medicare benefits remain unaffected.
Several Payment Options
Reverse mortgage payment options include flexible disbursement options that can be tailored to your needs. You can receive funds in a full or partial sum, in monthly payments, a line of credit, or according to other options. It is even possible to change disbursement options during the term of the loan.
The Home Equity Conversion Mortgage is the most common of all reverse mortgage loans and is managed by HUD. Because the loan is federally insured, you are protected against things like lender defaults or housing market declines. If housing prices go down and the loan balance is more than the house is worth, neither you nor your heirs will have to cover the difference. It will be paid by government insurance.
Avoiding Reverse Mortgage Scams
Sadly, reverse mortgages are not only a great opportunity for borrowers, but due to the nature of the loan and the population that is getting them, they are also a magnet for fraudsters and scammers. In recent years, stronger government regulations have helped reduce the number of reverse mortgage cons. But the bad guys still target senior citizens.
One of the most common ways borrowers are scammed out of their money is when they use a reverse mortgage plan to pay for home improvements. Some vendors and home-improvement contractors have not actually delivered on the promised quality or quantity of work - or even worse, some steal the homeowner’s money outright.
Sellers may push you to invest the money from your reverse mortgage and buy other financial products from their company. They may try to rush you through the process before you get to read everything or check with a counselor. Our advice is to resist all of these proposals and shady practices, and familiarize yourself with important mortgage terms and expressions before purchasing a loan like this one.
The last common fraud issue is probably the hardest to face: being taken advantage of by relatives and caregivers. There are cases of family members using attorneys to take out a reverse mortgage on the home and then stealing the money or convincing the homeowner to buy annuity or whole life insurance that they can afford only through a reverse mortgage purchase.
How We Evaluate Reverse Mortgage Companies
Plenty of lenders offer reverse mortgage loans, but most can’t meet the standards set by the industry’s leading firms. We believe that there are certain key features that lenders should and must possess. We have identified those features and use them as the basis for our reviews:
The best reverse mortgage lenders offer potential customers as wide an array of choices as possible when it comes to loan options and the way that disbursements are paid out. Customer-friendly practices are important, and lenders that give borrowers more choices deserve to be featured here.
Pricing & Discounts
There are many different reverse mortgage fees and charges. Even though the costs are somewhat regulated by the government, you can definitely save money by picking a lender wisely - which is exactly why our list includes only those companies that offer the most competitive deals to borrowers. A company that is committed to providing more for less will always earn a place in our reviews.
Quality service and support are essential. Reverse mortgage loans are not simple. Companies that take time to present clear and important information to potential customers deserve special praise.
Our overall ratings are influenced by the quality of the vendor’s customer support as well as how much lenders work with borrowers to guide them through the process of taking out a loan.
Can you lose your home with a reverse mortgage?
Yes. Reverse mortgage pitfalls are real, and these loans are not a carefree solution to your financial issues as you transition into retirement. These loans are as binding as any other, and while your home is generally much safer when you purchase a reverse mortgage, you are still required to fulfill certain obligations. Simply living in your home is one of them.
And while living in your own house certainly seems like a given, many people do not understand the consequences. If you move out or decide to sell your home while a reverse mortgage loan is active, you will trigger a loan default that may result in a foreclosure.
And that’s not all.
You also risk losing your home if you do not live in it as your primary residence, or even if you are away from the house for more than 12 consecutive months. In fact, you are required to live in the home for more than six months each year, excluding some medical reasons that can keep you away from it. And you are required to maintain it according to FHA reverse mortgage requirements.
Other issues that may result in losing your home have to do with not paying taxes and homeowner’s insurance, or if you pass away without listing your spouse or partner on the loan as a co-borrower or non-borrowing spouse.
Are heirs responsible for reverse mortgage debt?
No, the heirs of a deceased borrower - including a spouse who is not a co-borrower - are not responsible for paying back the loan. Reverse mortgages are non-recourse loans, meaning that even if their balance is more than the appraised value of the home, the extra cost gets absorbed by the Federal Housing Administration.
Still, reverse mortgage rules and regulations put a lot of responsibility on heirs after the death of the last borrower. That is when the reverse mortgage loan comes due and heirs have to decide what to do next. They will usually get 30 days’ notice from the lender to buy the home, sell the home, or turn it over to the lender to satisfy the debt.
It is possible to extend this up to a year so the heirs can have more time to sell the home or provide finances for purchasing it, but the most common extensions are up to 90 days.
What happens if you outlive reverse mortgage?
One of the most important reverse mortgage facts is that you absolutely cannot outlive your loan. There is a lot of misinformation that makes seniors worried about being kicked out of their homes due to outliving these loans, but they are not based in reality.
The only way you can default on your loan is if you fail to pay your property taxes or insurance, or if you neglect maintaining your house. Other than that, no reverse mortgage will ever lead to you or your spouse having to stop living in your home.
What is the downside of getting a reverse mortgage?
There are a couple of clear dangers of getting a HECM loan, the most obvious being the fact that even the best reverse mortgage rates and fees can eat up your equity. This in turn leaves fewer assets to your heirs, who will also have to repay the loan balance if they want to keep the home for themselves.
The other big downside of reverse mortgages is that your health directly affects the loan, meaning that you have to remain capable of maintaining your home and keep living inside it.
Reverse mortgage qualifications dictate that If your health deteriorates so much that you have to be relocated to a medical facility for an extended period, the loan becomes due and you may lose your house.
There is also the issue of losing eligibility for needs-based government programs like Medicaid that can be affected by taking out a reverse mortgage.
The third serious downside concerns borrowers with friends, relatives, or roommates who are not on the loan paperwork but live with them in the home. These people can be left stranded and forced to vacate, even if you list them as boarders on the paperwork because no one under the age of 62 can be considered a borrower. This issue extends even to spouses.
Can you walk away from a reverse mortgage?
Yes, you can. The majority of reverse mortgage loans come with a three-day period during which you can exercise “the right of rescission” and change your mind about taking out a loan, even if it’s signed. You can cancel the loan during that period without penalty fees. To cancel a reverse mortgage plan, all you have to do is alert the lender in writing within three days from signing.
The lender is then required by law to cancel all loan documents and return all fees, closing costs, and unused funds paid by the consumer within 20 days.
This doesn’t happen often. Because reverse mortgages are government-insured and regulated, every borrower attends a mandatory counseling session in which the lenders present all the facts, costs, pros, and cons.
This commitment to informing borrowers means that very few change their minds. Still, the most notable reverse mortgage companies all include the three-day window as a safeguard that gives borrowers time to think about their decision.