Note: While we have spent extensive time researching and interviewing experts on reverse mortgages and their suitability for seniors aging in place, a home equity conversion mortgage is not right for everyone. As with most financial products and services, there are many pros and cons to reverse mortgages. For a full understanding of your options, always consult with a financial adviser or housing counselor. Aside from the resources detailed here, the U.S. Department of Housing and Urban Development (HUD) maintains extensive information and connections to financial professionals who can help you understand your credit and financing options. Other resources include the National Reverse Mortgage Lenders Association and AARP.
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Retirement should be a joyful time of life, but living on a fixed income poses many risks. A reverse mortgage is one option for shoring up your finances and eliminating the burden of monthly mortgage payments by leveraging the equity you have in your home. Regulated by the department of Housing and Urban Development (HUD), a home equity conversion mortgage (HECM) lets homeowners who are 62 or older take out a loan or line of credit against their home equity that does not need to be repaid until the borrower (and any non-borrowing spouse) moves or dies.
Because the Federal Housing Authority (FHA) backs HECMs, HUD places limits on certain fees and other aspects of the loans, leaving little margin for differentiation among competitors. The amount you can take out, for example, is determined by HUD’s principal limit factor table, your home equity, your age and the interest rate set by the lender.
While the HECM products available to borrowers are fairly standardized, the lenders themselves vary in size, customer service approach and reputation. Some deal solely in HECM loans while others offer conventional mortgages and home equity loans as well. For higher-end borrowers and those whose homes do not meet FHA standards for HECM eligibility, such as co-ops and some condos, a handful of banks offer proprietary reverse mortgages (also called jumbo reverse mortgages) that are not backed by the FHA.
The lenders we’ve reviewed here offer their services in most states in the country, and we used broad criteria to evaluate them. You may find options in your area that are better suited to your needs. The quality of your experience will depend in large part on the loan officer you choose, as you will be trusting that person to get you the best deal for your situation and your home. We suggest you use this guide as a starting point and then do your own one-on-one investigation before you sign on any dotted lines.
1. Finance of America Reverse: Best overall
Finance of America Reverse (FAR) is our choice for the best reverse mortgage lender. It offers a variety of loans that aren’t standard or even offered by competitors. It’s also well regarded for its customer service. FAR lends in 43 states and Puerto Rico.
FAR’s website is pretty sparse on details about its loans, which is common for reverse mortgage lenders. There isn’t information about rates or terms, though these often depend on your home and its value. The company would rather you call and speak to customer service to learn more. There is a calculator on the site you can use to find out about how much you could get from a reverse mortgage, but you need to provide personal information to use it.
In addition to standard reverse mortgages, FAR offers reverse mortgages for purchase. These are loans you can use to find a smaller or newer home. It also allows borrowers to refinance their reverse mortgages.
FAR offers its own Homesafe mortgage, which can be used on homes worth more than $670,000. With a Homesafe, you can get a loan on a home worth up to $4 million. One downside to a Homesafe loan is that if your home loses value, you or your heirs could be liable for the difference. Homesafe loans are available in 16 states and Washington D.C.
Read our full review here: Finance of America Reverse
2. Lending Tree: Best for rate comparison
If you want to see all your options, Lending Tree is the best way to comparison shop for a reverse mortgage. To see multiple offers, you fill out a short questionnaire with information about you home, its value and its occupants. You need to create an account, and you should receive offers within a few moments. You’ll likely get calls soon after as well. Based on the information you provide, it's unlikely your credit will be impacted by filling out the form.
Lending Tree isn’t a lender itself, but it works with many highly rated reverse mortgage lenders, including several we reviewed. Since it is a comparison shopping tool, you won’t learn the specifics of your loan’s rates and terms until you get an offer. Once you accept an offer and apply for the loan, Lending Tree isn’t part of the transaction and can’t answer any questions.
In case you want to do some preliminary research before applying for a reverse mortgage, Lending Tree has several articles that provide more details about their ins and outs.
Read our full review here: Lending Tree
3. One Reverse Mortgage: Best borrowing experience
One Reverse Mortgage (ORM) is the reverse mortgage arm of Quicken Loans. It’s well regarded for its customer service and easy application process. ORM doesn’t have brick-and-mortar branches – all its loan applications are completed online.
ORM’s website has a lot of information about reverse mortgages, something other companies lacked. You also don’t need to volunteer as much personal information to use tools like its calculator, though you still need to provide that information if you apply for a loan. ORM is also much more transparent about the fees and other costs associated with a reverse mortgage than some other lenders.
One Reverse Mortgage has many options for how you receive your money. In addition to standard lump sum dispersals with fixed or variable rates, it also offers a line of credit option that functions similar to a home equity line of credit. ORM doesn’t offer a jumbo reverse mortgage, so if you have a high value home, you need to consider another lender.
Read our full review here: One Reverse Mortgage
4. American Advisors Group: Best brand
American Advisors Group (AAG) is one of the largest, most well known reverse mortgage lenders in the country. AAG lends to residents in every state except Massachusetts and Washington D.C. One benefit of going with a large company that originates many loans is the process is fairly streamlined.
AAG’s website has a collection of materials that thoroughly explains the ins and outs of reverse mortgages and includes a list of fees and estimated costs. So if you’re interested in a reverse mortgage, the website can help you learn a little more before applying. Though well regarded for its customer experience, AAG has had some legal issues in the past, which is why it doesn’t lend in Massachusetts.
AAG’s loans include fixed and variable rate options as well as reverse mortgage options that allow for the purchase of another home. In some states, you can get a jumbo reverse mortgage – it isn’t federally backed but allows you to get a reverse mortgage on more expensive properties.
Read our review here: American Advisors Group
5. Longbridge financial: Best for high end borrowers
If you have a more expensive home and value a personalized lending experience, Longbridge Capital is an option worth looking into. It offers multiple jumbo loan options for homes with values beyond what the FHA is willing to insure. Longbridge’s jumbo loans are available in fixed or variable rates. It also offers a Platinum loan with few upfront costs. One drawback of a jumbo reverse mortgage is it's not FHA insured, meaning if your home’s value goes down, you or your heirs will be liable for the difference.
As a younger, smaller lender, Longbridge has a solid reputation with well-regarded customer service and few complaints. Its website has a wide range of useful information about reverse mortgages.
Read our review here: Longbridge Financial
How reverse mortgage help you age in your home while supporting you financially
For all its benefits, retirement can often leave you more vulnerable to financial distress. Taking out a reverse mortgage is just one option for addressing your credit and financing needs. Because home equity conversion mortgages (HECMs) are federally backed and regulated, there isn’t a huge difference among competing lenders’ products (though you should still shop around for the best deal, of course). But there are other ways to ease your financial burden and increase cash flow while aging in place. Knowing all your options can help you make smarter decisions.
Reverse mortgage (HECM)
A home equity conversion mortgage (HECM) allows homeowners who are 62 or older to take out a loan or line of credit against their home equity that does not need to be repaid until the borrower (and any non-borrowing spouse) moves or dies. Because the loan is backed by the Federal Housing Authority (FHA), certain fees and limits are set in stone. The amount you can take out is based on your home equity, your age and the interest rate. At a 4.5 percent interest rate, a 62-year-old may be able to take out a reverse mortgage for up to 43.9 percent of the home’s value (with the value capped at $679,650). You can take out only 60 percent of that limit in the first year, unless you need more to pay off an existing mortgage and related obligations. After the funds pay off the existing mortgage, you can take out the remainder of the 60 percent as a lump sum or choose to have it available as a line of credit, which will have an adjustable interest rate. One advantage of the line-of-credit option is that any unused credit grows and compounds at the same rate as the loan’s interest rate.
While you don’t need to make payments on the loan as long as you live in your home, you will still be responsible for paying property taxes and homeowners insurance. Failure to pay those has resulted in many reverse mortgage foreclosures in recent years.
One big benefit for borrowers or their heirs is that reverse mortgages are “nonrecourse” loans: If the home’s value drops below the amount of the loan, borrowers won’t have to pay back the difference. When the loan is payable, they can either relinquish the home or pay back 95 percent of its current value.
Reverse mortgage for purchase
Many people think of reverse mortgages as a way to stay in the home they’ve owned for decades, but since 2008 it has also been an option for seniors who would like to purchase a new home. The same limits and rules apply, so you would only be able to use the mortgage for a percentage of the purchase based on your age. But a reverse mortgage for purchase is an option for anyone looking to relocate without having to make new mortgage payments, especially if their new home costs more than the equity they have in their old one.
Jumbo reverse mortgage
This is a product available in some states, and from select lenders, that is not backed by the government. The interest rates are higher, and these are not nonrecourse loans. But if you live in a condo that is not approved by the FHA or in a coop apartment, a jumbo loan would be your only option for a reverse mortgage. It’s also a way to access equity for a home worth more than the HUD cap of $679,650.
Forward mortgage refinancing
This is one avenue you may have written off, knowing it’s much harder to get a new loan when you are no longer employed. But it’s not impossible. Speak to your current mortgage lender to talk about your options for loan modification or refinancing. Though banks usually calculate mortgage qualification based on income, some now consider annuitized assets as well. They calculate what 70 percent of the money in your retirement funds would look like divided by the number of months in the loan for which you are applying (for example, 360 months for a 30-year mortgage). Your retirement assets must be liquid to qualify for consideration.
You should also talk to a housing counselor – either someone at a nonprofit senior center you already know and trust or a specialist listed on the HUD database – to discuss other available options. Some programs that were set up in the wake of the 2008-2009 housing crisis, such as HARP and the Hardest Hit Fund, are still available to offer modifications for those who have no equity or are underwater on their mortgages. You can speak to a HUD counselor anytime by calling the department at (888) 995-HOPE (4673).
Home equity loan or home equity line of credit
This could be an option if you have equity in your home and know your need for extra cash flow will occur within less than five to 10 years. The maximum amount you can take out is usually 80 percent of your home’s value, minus the amount you currently owe on a forward mortgage, but the max may be less if your income or annuitized assets (see above) are too low. So, a $100,000 home with $40,000 left to be repaid in mortgage would have a $40,000 home equity loan limit. As the name indicates, a home equity loan gives you the money in a lump sum, which accrues fixed interest and must be repaid in monthly payments, just like a regular mortgage. A HELOC lets you borrow up to that limit for a set period (five to 10 years), at an adjustable interest rate. You pay interest only on what you’ve borrowed, and during that time, you can make interest-only payments. After that draw period is up, you’ll have another period of years (often 20) in which to pay back what you borrowed.
A benefit to these loans is that interest payments are tax deductible (on a loan value up to $1 million when combined with mortgage interest). On the other hand, if you default on a home equity loan or HELOC, you could be subject to foreclosure. One more big drawback of a HELOC, as many discovered during the recession, is that banks can freeze the line of credit if they believe the value of your home has dropped significantly or that you have become otherwise incapable of paying back the loan.
Other options for credit and financing
VA home loans
Other specialized loans
There are loans designed for specific, short-term needs, such as home improvements, medical bills and home energy costs.
‘The Family Bank’
“There have been several times over the years when I’ve met with the families, and they really didn’t realize that their parents were in such a precarious financial situation,” says Alfie Schloss, a licensed reverse mortgage originator in New York.
Rather than have their family member take out a reverse mortgage, which has high closing costs and generally higher interest rates than traditional mortgages, the rest of the family can opt to pool their resources and keep the banks out of it. If anyone is concerned about the fairness of this transaction, or worried about the consistency of such an arrangement, an attorney experienced in estate law can draw up a formal agreement for the family. In essence, the arrangement is a kind of reverse mortgage in which the adult children are both heirs and lenders (usually without charging their parents interest).
Government benefits and assistance programs
In many cities and states, seniors who earn less than a set annual income can apply for property tax exemptions. In New York, for example, anyone over 65 who earns less than $29,000 a year can pay 50 percent less in property taxes.
The federal government also offers programs to help low-income individuals and families pay for home energy and for weatherizing their homes to reduce energy costs. States may offer even more help with those costs.
You may also be eligible for assistance paying for other utilities, food and health care. The National Council on Aging has a BenefitsCheckUp tool that can find what is available to you. Or you can visit a local senior center, where experts can guide you through the process of registering for benefits.
As tantalizing as reverse mortgages may be – particularly with celebrities endorsing them at every turn – there are other options available for securing credit or financing in your senior years. As with all financial products and services, there are many professional and nonprofit resources available where you can find answers to your questions without dipping into your pockets.