How to Choose the Right Reverse Mortgage Lender

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A reverse mortgage lets you access your home’s equity without needing to make payments to the reverse mortgage lender, creating a reliable source of income for you. However, reverse mortgages are often complex, and the nature of the loans can vary dramatically from one lender to the next. As a result, choosing the right mortgage lender is essential. Here’s how to pick the right one.

Why Compare Reverse Mortgage Lenders?

Comparing reverse mortgage lenders is beneficial for several reasons. First, it helps ensure you’re getting the right loan based on your needs. Reverse mortgages are available in a few different types. Some lenders offer a range of reverse mortgage products, while others focus on a specific kind of arrangement. Without a comparison, you might assume the option you’re presented with is the only one, which isn’t ideal.

Second, comparing reverse mortgage lenders ensures you’re receiving the most favorable terms possible. Like traditional home loans, each lender sets its own interest rates, fee structures, and various requirements. By making a comparison, you’re able to see how the reverse mortgages differ, making finding the most financially sound option simpler.

Factors to Consider

When you compare reverse mortgage lenders, there are a few specific factors you’ll want to consider. Here’s an overview of each one.


As with any type of loan, one of the primary points you want to examine is cost. This means reviewing both the associated interest rate and any fees you’ll pay over the life of the arrangement.

First, it’s critical to find out if the interest rate listed is fixed or variable. While a fixed rate won’t change over the life of the loan, that isn’t the case with variable rates. Instead, a variable APR can fluctuate over time. That leads to some unpredictability, and it may or may not work in your favor.

Second, there’s the interest rate itself. As with mortgages, the rate may depend on the current prime rate, your credit score, the lender’s margins, and more.

Third, you need to examine the various other fees. Origination fees are capped at $6,000, so you shouldn’t see amounts in excess of that. However, closing costs, insurance premiums, service fees, property taxes, and other fees are all potentially wrapped into the loan. While you don’t pay these out of pocket, they do eat up your available equity, limiting how much income you can access.

The Type of Loan

Many people don’t realize that there are several types of reverse mortgages. Each one works a little differently, bringing with it a unique set of benefits and drawbacks. As a result, you want to compare them to see if one arrangement is better than another for your situation.

Home equity conversion mortgages (HECMs) are the most common reverse mortgage type, and they’re insured by the federal government through the Federal Housing Administration (FHA). If the amount owed on a reverse mortgage exceeds the home’s value, the FHA will typically assume the loss, either wholly or partially.

Next, there are proprietary reverse mortgages. They’re similar to HECMs but aren’t backed by the federal government. However, eligibility requirements are potentially looser, though they do potentially have higher fees.

There are also single-purpose reverse mortgages. With this option, the lender can restrict how money provided through the arrangement is used by homeowners, but the fees are usually lower.

Reputation and Reviews

As with any lending product, considering the reputation of the lending company is essential. There are reverse mortgage scams out there. Plus, some lenders are known for treating borrowers better than others. As a result, it’s wise to read reviews and check ratings at reputable sites, such as the Better Business Bureau (BBB). That way, you can ensure that working with the lender is a smooth process.