A reverse mortgage is a type of home loan for seniors that works backward. Rather than making payments to your lender, you receive payments - sort of like an advance on your eventual home sale.
If you're considering one of these loans, there are many reverse mortgage companies you could work with. Some offer more loan options or lower rates, while others come with better service, multiple disbursement options or cater to different age groups than the typical 62-plus.
Not sure which one to choose? See our picks for the best reverse mortgage companies below.
Why we chose this company: Longbridge Financial (NMLS #957935) is our top reverse mortgage lender. It consistently offers some of the lowest interest rates among the companies we reviewed.
Longbridge offers Home Equity Conversion Loans (HECM) and HECMs for purchase. The lender's proprietary Longbridge Platinum loan is a jumbo reverse mortgage with a maximum borrowing limit of $4 million. That's the extent of their reverse mortgage products, though, so they don't offer a lot of variety.
The company also has great customer reviews and few complaints, and it remains your servicer after closing - meaning you'll do business with the same company for as long as you have the loan.
Why we chose this company: Finance of America Reverse (NMLS #2285) has something for just about everyone, with a large variety of mortgage options.
FAR offers the popular HECM reverse mortgage, HomeSafe jumbo loans up to $4 million and a few alternatives that older homeowners might want to consider.
For those that can't qualify for a HECM or want something a little different, there's also FAR's proprietary EquityAvail option. Described as a "retirement mortgage," it blends elements of a typical mortgage loan with a reverse mortgage, allowing borrowers to minimize their monthly housing costs as they age.
FAR also offers a home-sharing program called Silvernest. The program matches seniors with rent-paying housemates so they can earn income and put more money toward retirement goals. It can be used in tandem with FAR's loan offerings.
Why we chose this company: Fairway Independent Mortgage (NMLS #1630898) is one of the most active mortgage lenders in the nation - particularly when it comes to HECM for purchase loans.
The company has focused a lot of its efforts on these loans in recent months, and thanks to its streamlined operations, it can close many in just 17 days. While the company's overall average is 30 days, that's still a far cry from the 45 to 90 days most lenders quote - and for seniors on a tight timeline, the quick funding might just be a game-changer.
The company also offers a solid array of online resources (including a reverse mortgage blog, an FAQ section and a reverse mortgage calculator), and on the interest rate front, Fairway's rates fall somewhere in the middle.
Why we chose this company: If you're looking for a more tech-driven reverse mortgage experience, Open Mortgage's (NMLS #2975) online loan platform might be for you.
With Open Mortgage, you get all kinds of educational video content and can start your application process online. While you can't complete the entire process there (HECMs require counseling through a HUD-approved agency), you can use the platform to run through various loan scenarios and, after closing, manage your loan, connect with customer service or request funds from your line of credit.
According to our analysis of HUD data, Open Mortgage has higher average interest rates than some of the others on our list, though not the highest. Make sure you compare rates from at least a few different lenders to ensure you're getting the best deal.
Why we chose this company: Customers are quite happy with American Advisors Group (NMLS #9392), which boasts a 4.5 on Trustpilot.
AAG is the biggest reverse mortgage lender by volume. Most of the customer reviews on Trustpilot (84%) rate their experience highly - either four or five stars. The lender also has a 4.7 out of 5 stars on the Better Business Bureau.
The company offers both standard HECMs and HECMs for purchase, as well as refinancing options for seniors looking to tap their home equity or reduce their mortgage payments.
It's worth noting that CFPB ordered AAG to pay over $1 million in penalties in 2021 for what the Bureau called "deceptive acts aimed at older homeowners." The CFPB has more about these allegations on its website. (We are reaching out to both the CFPB and AAG for comment).
All Reverse Mortgage (NMLS #13999) would have made our list because it offers some of the lowest interest rates on the market. Its proprietary All Reverse Loan Optimizer (ARLO) software compares different loan products, instantly determines eligibility and provides real-time rate quotes. The company is family-owned and operated and has a nearly perfect five-star rating with the BBB.
Why we didn't choose it: Its geographic service area - just 16 states - was too small. For consumers in the states it does service (California and Texas, to name a few), the company is worth a look.
American Senior (NMLS #7147), the reverse mortgage arm of HighTech Lending, offers the standard reverse mortgage options - HECM, HECM for purchase and jumbo loans. Their interest rates are competitive, but other companies offer lower rates. American Senior does offer a loan where you can refinance a HECM loan into another HECM.
Why we didn't choose it: American Senior might have made the list, but its lack of reviews on Trustpilot and the Better Business Bureau, small reach (just 21 states) and deceptive advertising charges held them back.
Homebridge (NMLS #6521) is a lender that offers reverse mortgages, as well as many other loan products, including purchase loans, refinances and home equity lines of credit (HELOCs).
Why we didn't choose it: Though the company has strong reviews on Trustpilot (4.8 stars), it has a mere one star on the BBB and 74 complaints in the last three years. Their reverse mortgage content and resources were also thin compared to other options we considered.
Liberty Reverse Mortgage - also called Liberty Home Equity Solutions (NMLS #2726) - was the No. 9 reverse mortgage lender by volume in 2022. The company offers both HECMs and a proprietary jumbo reverse mortgage, which goes up to $4 million and is available for borrowers 55 and up. The lender also offers some of the lowest rates on the market.
Why we didn't choose it: Liberty's main drawbacks are due to its parent company - PHH Mortgage/Ocwen - which was recently sued by the state of Florida for servicing failures, including overcharging for property inspections. The company also has 17 regulatory actions against it, according to the NMLS database.
Nationwide Equities Corp. (NMLS #1408) has solid reviews and a full suite of reverse mortgage options, including HECM loans, HECMs for purchase, jumbo reverse mortgages and refinancing for reverse mortgages. A standout option is the company's proprietary NY Co-op reverse mortgage.
Why we didn't choose it: Their small reach (just 16 states), plus allegations of deceptive advertising from the CFPB in 2021 are what pushed the company out of the running.
Reverse mortgage programs are complicated products. While they don't require traditional monthly mortgage payments, they are a debt - and they do need to be repaid eventually.
Reverse mortgage funding is a type of loan for older homeowners - generally, those aged 62 and up (though some lenders allow borrowers to be as young as 55). It allows borrowers to turn their home equity into cash, which is typically used to supplement retirement income, cover the costs of aging-in-place home repairs or improvement projects or reduce their monthly housing expenses.
A reverse mortgage essentially advances the money from your eventual home sale. Unlike with traditional mortgage loans and equity products (like cash-out refinances and home equity loans), reverse mortgage holders don't make monthly payments.
Instead, the lender pays the borrower. The lender will give you that advance via one large lump sum payment, many monthly payments or a line of credit. Borrowers can also choose a combination of these payouts.
You can take out a reverse mortgage on several types of real estate, including a single-family home, a multi-unit property that you currently live in, a townhouse or a condo (with HECMs, it must be an FHA-approved condo). For more details, read Money's reverse mortgage guide.
You will be required to pay property taxes, homeowners insurance and HOA dues, or your lender could start foreclosure proceedings. To protect its investment, your lender will also require you to maintain the home and keep it in good condition.
Your loan balance won't come due until you pass on, sell the home or move out of the home for at least 12 months - to an assisted living facility, for example. In the case of your passing, your heirs would be responsible for repaying the lender out of your estate, or, if that's not possible, via their own cash or by selling the property.
These loans are best for homeowners with lots of equity who plan to stay in their homes for a while and who have enough income to cover the costs of property taxes, insurance and home maintenance. They're not ideal if you are struggling financially, think you may move out soon or want to keep your home in the family for generations to come. Make sure you understand all the pros and cons of a reverse mortgage before making your decision.
There are four types of reverse mortgages: Home Equity Conversion Mortgages (HECMs), proprietary reverse mortgages and single-purpose reverse mortgages.
Here's how those differ:
Reverse mortgages can also come with either an adjustable or fixed interest rate. With an adjustable rate, your interest rate can change over time. Fixed rate loans have a consistent rate for the entire loan term.
Reverse mortgage qualifications vary by loan program and the lender but typically follow a set of rules.
For HECMs:
For proprietary jumbo loans:
Like other mortgages, a reverse mortgage uses your home as collateral. So when you sell the home, the loan comes due, and you must use the proceeds to pay off the balance. This is true whether you sell the house or your heir does after you pass.
HECMs and many proprietary mortgage loans have non-recourse clauses. This means that if you default on the loan, you won't owe more than the sale price of the home.
With most reverse mortgage loans, you have what's called a right of rescission. Legally, this means you have up to three business days after closing to cancel a reverse mortgage and get your money back, including closing costs. You'll have to notify your lender in writing if you plan to cancel, so make sure to send it via certified mail. This will alert you once it's been received. (Note: There is no right of rescission with HECM for purchase loans unless your state specifically offers it.)
You can also get out of a reverse mortgage by refinancing - either into a new reverse mortgage loan or into a conventional loan. Follow these mortgage refinance steps if this is a strategy you're considering.
Choosing the right reverse mortgage lender is critical, so be sure to shop around and consider at least a few options before moving forward.
When choosing a mortgage lender, you should:
Reverse mortgages can be a handy product in retirement, but they have some notable drawbacks. Here's a look at both the good and bad for these unique mortgage products.
As you can see, reverse mortgages have risks. If you're not sure one is right for your scenario, talk to a financial professional for personalized guidance. They can help you determine the best way to achieve your retirement goals.
You pay back a reverse mortgage out of pocket, by selling your home or refinancing the mortgage into a traditional mortgage loan. You may also opt to give the lender the deed to your property. This is typically an option if you're facing foreclosure.
Remember: Repayment isn't required until you live outside the home for at least 12 months, pass away or stop making your property tax and insurance premium payments.
When evaluating reverse mortgage lenders, we considered a variety of factors, including:
Some of the resources we used when determining our best reverse mortgage lenders include:
© Copyright 2023 Money Group, LLC. All Rights Reserved.
This article originally appeared on Money.com and may contain affiliate links for which Money receives compensation. Opinions expressed in this article are the author's alone, not those of a third-party entity, and have not been reviewed, approved, or otherwise endorsed. Offers may be subject to change without notice. For more information, read Money's full disclaimer.