Reverse Mortgage Program Comparison

Did you know that there are 19 different reverse mortgage programs available in the marketplace today? While many programs have distinct advantages and disadvantages, many of the 19 are just copy-cats of each other, with a few minor differences. This article reviews the best reverse mortgage programs from both the biggest banks and smaller niche lenders by outlining the pros and cons of each one. [The names of our banking partners are available to our clients upon request]

Program 1: FHA Reverse Mortgage - Home Equity Conversion Mortgage (HECM)

This is the grand-daddy of all reverse mortgages. Congress designed, HUD regulates it, FHA insures it, Fannie Mae invests in it and it is offered through our company. Almost all reverse mortgages are modeled after the HECM in their essential elements.

Pros: often has the lowest interest rate of all programs; a fixed rate reverse mortgage is available; security of knowing that it is backed by the FHA; in some cases it provides the maximum amount of money of any program; typically low or no closing costs out-of-pocket; in some cases is the cheapest program over the long run; offers the "tenure" income payment option; Congress strongly supports the program's use and expansion; HUD controls the guidelines.

Cons: low loan limits restrict the amount of cash available on some properties; may have higher total financed closing costs due to the required FHA reverse mortgage insurance premium; properties must meet FHA guidelines; Congress must continue to authorize its availability and controls county loan limits; HUD controls the guidelines (for better or worse).

Program 2: Fannie Mae Home Keeper Reverse Mortgage

The US Government chartered mortgage funder Fannie Mae has its own reverse mortgage program that operates the same as the HECM, but make sense only in a few limited circumstances.

Pros: may offer a greater loan amount in rural counties than other programs; does not require FHA insurance; available for some Stock Cooperatives ("Co-ops")

Cons: usually offers far less money than other programs in populated counties; interest rates are higher than the HECM

Program 3: Jumbo Reverse Mortgage

Like the others below, this Bank's reverse mortgage program is based on the HECM in most respects, with the following differences.

Pros: home value limit is $5,000,000, allowing far greater loan amounts than the HECM for homes with higher values; lower closing costs than the HECM makes it a popular choice for some borrowers, especially when a large line of credit is desired; interest rates are comparable to most home equity lines of credit; funded and serviced by a trusted national bank.

Cons: variable interest rates; may offer less cash than the HECM for some borrowers.

Program 4: Fixed-Rate Jumbo Reverse Mortgage

Pros: Interest rate is fixed for the life of the loan; does not require FHA insurance; home value limit is $10,000,000; typically lower closing costs than the HECM; larger loan amounts than comparable jumbo reverse mortgages

Cons: lump-sum only, no line-of-credit option; loan-to-value ratio is more conservative than the HECM for lower property values (standard for all jumbo reverse mortgages)

Reverse Mortgage Program 5

Pros: available for borrowers under 62 years old.

Cons: minimum age is 60; maximum amount available is 20% of the home's appraised value.

Reverse Mortgages Programs 6 through 8

Pros: some programs offer slightly more cash for certain borrowers; some have more flexible guidelines which allow for unusual property types and/or situations.

Cons: serviced by smaller, niche banks

Reverse Mortgages Programs 9 through 19

Pros: Can be offered by non-FHA brokers who do not specialize in reverse mortgages.

Cons: See Pros. These are copy cat programs that are often offered by brokers who do not specialize in reverse mortgages and know very little about them; these programs do not provide any advantage to the borrower; usually have higher closing costs and interest rates than programs 1 through 8;

For a personalized comparison of the top reverse mortgage programs, please use the form below...