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Best Reverse Mortgage Lenders of June 2024
Increase your monthly retirement income
Homeowners aged 62+ can secure their retirement financial freedom with a reverse mortgage. Enjoy peace of mind with one of our top reverse mortgage lenders.
Best Reverse Mortgage Lenders of June 2024
Homeowners aged 62+ can secure their retirement financial freedom with a reverse mortgage. Enjoy peace of mind with one of our top reverse mortgage lenders.
Best Reverse Mortgage Lenders of June 2024
Homeowners aged 62+ enjoy financial security for their retirement with a reverse mortgage.
Last Updated June 2024
No available score
  • 3 types of reverse mortgages
  • Closes reverse mortgages in 45 days
  • A+ rating with Better Business Bureau
  • Available in all 50 states
  • Educational resources available
  • Phone and email support

Introduction to Reverse Mortgages

A reverse mortgage is a type of loan that enables homeowners to borrow against the equity they have in their homes. What makes it distinct from other types of loans, like home equity loans, is that the homeowner doesn’t have to make any payments during their lifetime. The loan is repaid in full only when the homeowner passes away, sells their home, or moves.

Reverse mortgages accumulate interest just like traditional loans. When it’s time to repay the loan, both the principal amount borrowed and all accumulated interest must be paid back.

Reverse mortgages can be a way for older homeowners to get cash in their retirement years without selling their homes. Homeowners can receive their loan as a lump sum, in monthly installment payments, or as a line of credit.

How are Reverse Mortgages Paid Back?

Borrowers do not need to make any payments on a reverse mortgage until one of these conditions is met:

  • You pass away (if the home is still inhabited by your surviving spouse, the loan will not need to be repaid until your spouse also passes away)
  • You sell the home
  • You move out for 12 months or longer
  • You fail to pay for property taxes or home insurance
  • You fail to keep the home in good condition

Once any one of these conditions is met, the loan must be paid back with all accumulated interest within one to six months, depending on what state you reside in.

In many cases, surviving family members choose to sell the home to repay a reverse mortgage. Reverse mortgages are required to be structured so that your estate cannot be forced to pay back more than the market value of the home at the time it is sold. So, if the market declines and the value of your home falls, your estate won’t be on the hook to repay the lost value.

Reverse mortgages can also be repaid without selling the home. Surviving family members can refinance the home or repay the loan on their own.

Why Take Out a Reverse Mortgage?

Reverse mortgages are often used by older individuals whose wealth is mainly concentrated in their homes. You may own a home that is worth a lot of money, but you don’t want to sell it because you still live there. If you don’t have any other assets that can be easily sold, it may become difficult to pay for everyday expenses, property taxes, and the upkeep of your home.

In that case, you can tap into the equity you have in your home to get cash. Options include a reverse mortgage, a home equity loan, a home equity line of credit (HELOC), and a cash-out refinance.

What makes a reverse mortgage potentially attractive is that it doesn’t require you to make any loan repayments during your lifetime. So, there’s no chance of falling behind on payments.

Reverse mortgage companies also don’t require you to have any income, nor do they check your credit score when making loan offers. The amount you can borrow is based primarily on the value of your home.

Types of Reverse Mortgages

There are three types of reverse mortgages available:

  • Home equity conversion mortgages (HECMs) are the most common type of reverse mortgage. Funds can be used for any purpose. These loans are provided by reverse mortgage companies and are backed by the US Department of Housing and Urban Development.
  • Single-purpose reverse mortgages are provided by state, local, or nonprofit agencies rather than by reverse mortgage companies. Funds can only be used for a specific approved purpose, like paying property taxes or making repairs to your home. These loans typically have the lowest fees of any reverse mortgage.
  • Proprietary reverse mortgages are issued by reverse mortgage companies and are not backed by the federal government. They are typically used for homeowners whose homes are worth more than the federal lending limit of $1,089,300 for HECMs.

Reverse Mortgage Payments

Borrowers can receive funds from a reverse mortgage in several different ways:

  • Lump sum : You can choose to receive your entire loan amount as a single upfront payment. This option incurs the highest loan fees. Your loan comes with a fixed interest rate.
  • Monthly payments : You can choose to receive monthly payments until your loan ends (also known as annuity payments) or over a fixed term, such as 10 years.
  • Line of credit : A reverse mortgage line of credit enables you to borrow funds on an as-needed basis. You only pay interest on the amount you actually borrow.

Many lenders also offer the option to receive smaller monthly payments in combination with a line of credit.

How to Qualify for a Reverse Mortgage

To qualify for a reverse mortgage, you must own your home and use it as your primary residence. If you have an outstanding mortgage balance, you can use some of the proceeds from your reverse mortgage to pay off your remaining mortgage.

HECM loans require that homeowners are at least 62 years old. You must also speak with an independent counselor who is approved by the Department of Housing and Urban Development to learn more about reverse mortgage basics before you can apply for a loan.

Proprietary reverse mortgages require that homeowners are at least 55 years old. There is no requirement for counseling.

Reverse mortgages typically do not have income or credit score requirements, unlike traditional loans.

How Much Can You Borrow?

The amount you can borrow with a reverse mortgage depends on a number of factors.

Every reverse mortgage requires a thorough appraisal of your home’s value. Of course, owning a more valuable home enables you to borrow more money. You can never borrow 100% of your home’s value since lenders must account for the interest you’ll accrue and risk the value of your home declining.

In addition, older borrowers can typically borrow more money than younger borrowers. Lower interest rates also enable you to borrow more.

The payment method you choose will also impact the amount you can borrow. The best reverse mortgage lenders typically offer smaller loans if you choose a lump sum payment rather than if you choose monthly payments or a line of credit.

Most borrowers can expect to borrow around 60%-80% of their home’s value through a reverse mortgage. Keep in mind that you need to budget for property taxes, homeowners insurance, and upkeep, or else you could face foreclosure.

The maximum loan amount for federal-backed HECM reverse mortgages is $1,089,300. There is no upper limit for proprietary reverse mortgages.

Reverse Mortgage Rates

Reverse mortgage interest rates can be fixed or variable, just like rates for traditional mortgages. They also go up or down as interest rates across the economy rise and fall.

Most reverse mortgages come with significant upfront fees, including origination fees, closing costs, and reverse mortgage insurance premiums. These fees can usually be paid with the loan proceeds when your reverse mortgage is issued.

Refinancing a Reverse Mortgage

It is possible to refinance a reverse mortgage. However, reverse mortgages have high upfront costs, so refinancing should only be considered under specific circumstances. You might consider refinancing your reverse mortgage if:

  • You want to add a spouse to your mortgage
  • The value of your home has increased significantly, and you want to borrow more money
  • You could qualify for a substantially lower interest rate

How to Choose a Reverse Mortgage Lender

Choosing the right lender for your reverse mortgage is very important. Different lenders offer different interest rates and fees. They may also let you borrow different amounts for your home or offer different payment structures for your loan.

When choosing a reverse mortgage lender, the most important factors to consider are:

  • Cost : Different lenders charge different rates and fees. It’s a good idea to calculate the total cost of your loan for multiple timeframes since it’s impossible to know how long you’ll live or if you’ll need to move out of your home in the future.
  • Payment options : Many lenders let you choose your preferred form of payment, whether a lump sum, monthly payments, or a line of credit. However, not all lenders offer all options, so consider what makes the most sense for you financially.
  • Application and appraisal process : Lenders are generally willing to work with a homeowner to issue a reverse mortgage, but some make it easier than others. You may prefer an online, over-the-phone, or in-person application process. You may also use an independent appraiser to determine the value of your home for some lenders.

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