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Reverse Mortgages
Costs & Fees
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Origination Fee
Appraisal Fee
The following Professionals are involved in today's Mortgage Markets :
A Reverse Mortgage has costs and fees much like regular mortgages. One difference is that the borrower can finance a lot of the cost and fees using the Reverse Mortgage so they do not have to pay them our of their pocket. Here are the costs and fees associated with HECM Reverse Mortgages . . .
Table of Contents
The borrower will pay the Reverse Mortgage Lender an Origination Fee to compensate them for processing the loan. The lender can charge an Origination Fee up to $2,500 if your home is valued at less than $125,000. If your home is valued at more than $125,000, lenders can charge 2% of the first $200,000 of your home's value plus 1% of the amount over $200,000. Reverse Mortgage Origination Fees are capped at $6,000.
Under the Reverse Mortgage Program, borrowers are charged a mortgage insurance premium equal to 2 percent of the maximum claim amount, or home value, whichever is less, plus an annual premium thereafter equal to .5% of the loan balance. The Mortgage Insurance guarantees that if the company managing your account, commonly called the loan " servicer ", goes out of business, the Government will step in and make sure you have continued access to your loan funds. Furthermore, the Mortgage Insurance guarantees that you will never owe more than the value of your home. This premium can usually be added to the Reverse Mortgage so the homeowner does not have to pay it our of pocket.
The appraisal establishes the legal value of the home. A Reverse Mortgage appraisal must be conducted by an FHA approved appraiser and follows specific FHA guidelines that require more documentation than a typical appraisal and generally cost between $300 and $500. This cost is usually paid by the homeowner out of pocket, but in some cases can be added into the Reverse Mortgage.
If the appraiser uncovers property defects, you must hire a contractor to complete the repairs. Once the repairs are completed, the same appraiser is paid for a second visit to make sure the repairs have been completed. The cost of the repairs may be financed in the loan and completed after the Reverse Mortgage is made. Appraisers generally charge $50 - $75 for the follow up examination.
Reverse Mortgage Lenders or their agents provide servicing throughout the life of the loan. Servicing includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying taxes and hazard insurance. Reverse Mortgage Lenders may charge a monthly servicing fee of no more than $30 if the loan has an annually adjusting interest rate and $35 if the interest rate adjusts monthly. At loan origination, Reverse Mortgage Lenders set aside the servicing fee and deduct the fee from your available funds. Each month the monthly servicing fee is added to your loan balance.
Mortgage Insurance Premium ( MIP )
In addition to placing a value on the home, an appraiser must also make sure there are no major structural defects, such as a bad foundation, leaking roof, or termite damage, Federal regulations mandate that your home be structurally sound, and comply with all home safety codes, in order for the Reverse Mortgage to be made.
Servicing Fee
Closing Costs
Like regular mortgages, Reverse Mortgages have all the costs associated with mortgages. Many of the closing costs can be financed using the Reverse Mortgage. Here are examples of closing costs :
- Credit report fee. Verifies any federal tax liens, or other judgements, handed down against the borrower.
$ 20
$ 20
- Flood certification fee. Determines whether the property is located on a federally designated flood plane.
$ 150 - $ 450
- Escrow, Settlement or Closing Fee. Generally includes a title search and various other required closing services.
$ 75 -$ 150
- Document preparation fee. Fee charged to prepare the final closing documents, including the mortgage note and other recordable items.
$ 50 -$ 100
- Recording fee. Fee charged to record the mortgage lien with the County Recorder's Office.
$ 50
- Courier fee. Covers the cost of any overnight mailing of documents between the lender and the title company or loan investor.
Varies
- Title insurance. Insurance that protects the lender or the buyer against any loss arising from disputes over ownership of a property. Varies by size of the loan, though in general, the larger the loan amount, the higher the cost of the title insurance.
$ 100
- Pest inspection. Determines whether the home is infested with any wood-destroying organisms, such as termites.
$ 250
- Survey. Determines the official boundaries of the property. It's typically ordered to make sure that any adjoining property has not inadvertently encroached on the Reverse Mortgage borrower's property.
Summary
As a guide to the costs and fees associated with a Reverse Mortgage, here is a Summary using a home value between $100,000 and $625,500 :
Origination Fee
Approximate
Minimum :
Maximum :
$ 2,500
$ 6,000
Mortgage Insurance
$ 2,000
$ 12,510
Appraisal Fee
$ 300
$ 500
Closing Costs
$ 715
$ 1,140
Title Insurance
$ 500
$ 3,127
Approximate Totals -
$ 6,015
$ 23,277