Reverse 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:
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
Ongoing costs - The loan has built into it some ongoing costs.
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.
- 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.
- 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.
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