Reverse Mortgage Program Comparison

There are about 19 reverse mortgage programs to choose from, some of which have significant pros and cons. While most emulate the HECM, they each have variations. The following is a review of the programs from both the smaller niche lenders to the largest banks. Upon request by our clients, we are happy to provide the names of our banking partners.

Home Equity Conversion Mortgage (HECM) – the FHA Reverse Mortgage

This is oldest of all reverse mortgages. Most reverse mortgages operate the same basic way as the HECM. Congress designed it, HUD regulates it, FHA insures it, Fannie Mae funds it.

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

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

Fannie Mae Home Keeper Reverse Mortgage

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

Cons: often offers far less money than other programs; interest rates are greater than the HECM

Jumbo Reverse Mortgage

Similar to the others below, this Bank's reverse mortgage is like the HECM in most ways, but has the following differences.

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

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

Fixed-Rate Jumbo Reverse Mortgage

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

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

Under 62 Reverse Mortgage Program

Pros: available for borrowers under 62 years old.

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

Niche Reverse Mortgages Programs

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

Cons: not widely available among brokers

The Rest of Reverse Mortgages

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

Cons: See Pros. Most are copy cat programs often offered by brokers who know little about reverse mortgages; there is no advantage to the borrower; most have higher closing costs and interest rates than the programs above