Comparing Reverse Mortgage Costs by Lender

Not all reverse mortgage offers are created equal. While the FHA sets rules that apply to every HECM lender -- the same mortgage insurance premiums, the same borrower protections, the same non-recourse guarantee -- the costs that lenders control can vary by thousands of dollars. The origination fee, interest rate margin, lender credits, and servicing fees are all areas where lenders compete for your business.

Taking the time to compare at least three lenders can save you $5,000 to $15,000 or more over the life of your loan.

How to Request a Loan Estimate

A Loan Estimate is a standardized document that every mortgage lender must provide within three business days of receiving your application. It breaks down all costs in a consistent format, making it possible to compare offers side by side.

What You Need to Provide

To receive a Loan Estimate, lenders need six pieces of information:

1. Your name
2. Your Social Security number (for a credit check)
3. Your estimated home value
4. Your property address
5. The loan amount you are seeking (or "maximum available")
6. Your estimated annual income

You do not need to commit to a lender to request a Loan Estimate, and requesting one does not obligate you in any way. Multiple credit inquiries for the same type of loan within a short window (typically 14-45 days, depending on the scoring model) count as a single inquiry on your credit report, so there is no penalty for shopping around.

How Many Lenders Should You Contact?

At minimum, contact three lenders. Ideally, include a mix of:

• A large national reverse mortgage lender
• A regional or local lender
• A reverse mortgage broker (who can shop multiple lenders on your behalf)

This mix gives you a good range of pricing structures and service approaches to compare.

What Varies Between Lenders

When you have Loan Estimates in hand, focus on these key variables:

Origination Fee

FHA allows lenders to charge up to $6,000, but many charge less or waive this fee entirely. The difference between a $6,000 origination fee and a $0 fee is straightforward -- but remember that a lender waiving the origination fee may compensate with a higher interest rate margin. See our detailed breakdown of origination fees.

Interest Rate and Margin

For adjustable-rate HECMs, the margin is the lender's markup above the index rate. Margins typically range from 1.5% to 3.0%. A lower margin means a lower rate for the life of the loan. Even a 0.25% difference in margin can translate to tens of thousands of dollars in savings over a decade of compound interest accrual.

For fixed-rate HECMs, compare the all-in rate directly. Read our full guide to reverse mortgage interest rates for more on how rates are structured.

Lender Credits

Some lenders offer credits that offset closing costs. A lender credit might cover part or all of the origination fee, third-party costs, or both. Credits are typically shown as negative amounts on the Loan Estimate. However, lender credits usually come in exchange for a higher interest rate, so evaluate the net effect over your expected loan duration.

Servicing Fee

Check whether the lender charges a monthly servicing fee. Many lenders now charge $0, but some still charge up to $30/month. Over 10 years, that is a $3,600 difference -- plus the compound interest on the servicing fee set-aside.

Third-Party Cost Estimates

Third-party costs like title insurance and escrow can vary based on which service providers the lender uses. Some lenders have affiliated title companies that may charge more or less than independent providers. You have the right to shop for your own title and escrow services in most cases.

Questions to Ask Every Lender

Beyond reading the Loan Estimate, ask each lender these questions to get a complete picture:

1. "What is your margin on the adjustable-rate HECM?" -- The margin is the most important long-term cost variable you can compare.
2. "Do you offer a reduced or zero origination fee? If so, how does it affect the rate?" -- Understand the trade-off between lower upfront costs and higher ongoing costs.
3. "What is the expected rate, and what is my estimated principal limit?" -- A lower expected rate means more borrowing power. Two lenders with different margins will give you different principal limits.
4. "Do you charge a monthly servicing fee?" -- A simple yes-or-no that affects your available proceeds.
5. "Can you show me the projected loan balance at 5, 10, and 15 years?" -- This reveals the true long-term cost. See our total cost scenarios for context.
6. "What is the TALC rate for my loan?" -- The Total Annual Loan Cost rate is the best single number for comparing overall cost.
7. "Will you service the loan, or will servicing be transferred?" -- Knowing who will manage your loan long-term matters for service quality.
8. "Are there any fees not shown on the Loan Estimate?" -- Ensure there are no surprises at closing.

Mortgage Broker vs. Direct Lender

You can obtain a reverse mortgage through a direct lender (a company that funds the loan itself) or a mortgage broker (an intermediary who shops your loan among multiple lenders). Each has advantages.

Direct Lender

• You deal with one company from application through closing
• May have proprietary products or rate specials not available through brokers
• The loan officer works for the lender, so their incentives are aligned with that company

Mortgage Broker

• Can compare offers from multiple lenders and find the best combination of rate and fees
• May have access to lenders you would not find on your own
• Broker compensation is typically paid by the lender, so using a broker should not add to your costs
• The broker works for you, not for a specific lender

Whether you choose a broker or a direct lender, the key is to compare multiple options. If you go with a direct lender, contact at least two or three. If you use a broker, ask them to show you the options they considered and explain why they are recommending a particular lender.

Creating a Comparison Worksheet

When you have received multiple Loan Estimates, create a simple side-by-side comparison. The most important items to compare:

• Origination fee
• Interest rate (initial rate for adjustable, fixed rate for fixed)
• Margin (for adjustable-rate loans)
• Expected rate
• Principal limit (how much you can borrow)
• Net proceeds after all closing costs
• Monthly servicing fee
• TALC rate at 5-year and 10-year horizons
• Projected loan balance at 5 and 10 years

Focus on the bottom line: which lender gives you the most money today with the lowest projected cost over your expected time horizon? A loan with higher upfront costs but a lower rate may be cheaper over 10 years than a loan with zero upfront costs but a higher rate.

The Bottom Line

Comparing reverse mortgage offers from multiple lenders is the single most effective way to reduce what you pay. The interest rate margin, origination fee, lender credits, and servicing fee all vary between lenders, and even small differences compound into significant savings over time. Request Loan Estimates from at least three lenders, ask the right questions, and focus on the total cost over your expected loan duration rather than any single fee. Your HUD-approved counselor can also help you interpret and compare offers as part of the required counseling session.