Fresno Reverse Mortgage Question - What are the costs involved in a reverse mortgage?

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Mortgage and Lending with Fresno/Clovis/Visalia/Madera and surrounding communities NMLS ID# 582935

 

How MuchReverse mortgages used to have a reputation as a very expensive loan.  But things have changed a lot in the last few years.

One of the largest fees on a reverse mortgage used to be the FHA MIP.  Now borrowers have the option of a new HECM Saver reverse mortgage which only carries an upfront premium of .01% of the home value.  The HECM Saver’s upfront fee for MIP is 2% of the home value.  The SAVER is a great option - just know that the loan amounts are less so you won’t be able to borrow as much.  If that’s not a problem for you, then check out the SAVER.

The first cost you may come across is the HUD Approved HECM Loan Counseling - this cost can be paid upfront, at closing or even waived depending upon the borrowers circumstances.

Most lenders will require a Appraisal deposit of $325 to $350 upfront to begin the loan process.  

Other fees paid at closing (which are normally financed into the loan) include:

Lender Fees
  • Loan origination fee. Lenders are allowed to charge a maximum of $6,000.00 (based upon this formula) however do your shopping! At this time (4/27/2011) most competitive lenders have zero to $2500 origination fees (depending upon the rate you choose).   Make sure you are getting an ethical, knowledgeable, and competitive lender.  
Third Party fees are paid to companies other than the lender and they include:
  • Appraisal
  • Settlement Fee (Escrow)
  • Title Insurance
  • County Recording Fees
  • Credit report
  • Flood Certification
  • Trust review fees (if you have a trust, the lender and title will need to review it to be sure it qualifies for a reverse mortgage and prepare a trust amendment)
  • Overnight Shipping (FedEx,etc)
  • You may have other fees due depending upon your state and county of residence.  I’m based in California, so if you are in another state give me a shout so I can get you more detailed information.

Ongoing costs -  The loan has built into it some ongoing costs.
  • Interest -  Of course, there is interest on the loan that accrues over time and your rate can be either a fixed or adjustable depending upon which loan you choose.
  • MIP - Don’t forget that in addition to interest FHA also gets an Monthly Mortgage Insurance Premium that is equal to 1.25% - so your effective interest rate on the loan is 1.25% higher than what the loan rate is.  Example - If you are getting a fixed rate reverse mortgage at 5.06%, your “effective” interest rate (Interest plus MIP) is 6.31%  (5.06% + 1.25%)  Your lender will be more than happy to provide you with an amortization schedule.
  • Servicing Fees - Lenders are allowed to charge up to $35 per month for servicing your loan.  But again, shop!  At this time most competitive lenders out there are offering HECM loans with zero servicing fees.

I hope this helped you to understand the costs involved in obtaining a reverse mortgage and please feel free to comment or contact me for more detailed information.

 

Posted by

Jeri Carmicheal, Reverse Mortgage Consultant, Serving Fresno, Madera, Visalia and surrounding communities.

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Rainer
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Jeri Carmicheal

Experienced Reverse Mortgage specialist in Fresno
Do I qualify for a reverse mortgage in Fresno, CA
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