Much like a traditional mortgage, a reverse mortgage does have fees associated with securing it. These fees are included in your initial mortgage balance and are not paid out-of-pocket. The following is a list explaining common fees you may have to pay when getting your reverse mortgage.
Origination Fee – The origination fee covers the lenders operating expenses associated with making the reverse mortgage. This can include things like overhead, marketing and title searches.
With an HECM reverse mortgage your origination fee is equal to the greater of $2,000 or 2% of your counties FHA loan limit. In most U.S. counties the 2% origination fee will be between $4,000 and $6,000. These fees vary widely on other reverse mortgage products.
Appraisal Fees – Before a reverse mortgage loan can be approved an appraiser will come to your home and inspect it. The appraiser will be looking to determine the worth of your home based mostly on condition, location and the value of comparable homes in your area. The cost of an appraisal is generally between $500 and $700.
If the appraiser uncovers a significant problem you will be required to hire a contractor to fix the problem before obtaining your reverse mortgage. That same appraiser will come out again and re-inspect the property. These repairs can often be performed after loan closing with funds from the reverse mortgage.
Mortgage Insurance Premium – The up front mortgage insurance premium is a fee associated with the HEMC reverse mortgage plan. This fee is equal to either .5% or 2% of your county’s FHA loan limit or the value of your home, whichever is less. This figure depends on how much of the available reverse mortgage balance is used at the time of loan closing. Additionally you will pay an annual premium of 1.25% of the loan balance.
The mortgage insurance premium guarantees that you will continue to receive your monthly payments and that you will never owe more than what your home is worth once the loan reaches maturity.
Closing Costs – Other closing costs that are generally included in a reverse mortgage are:
- Credit Report
- Document Preparation
- Flood zone certification
- Title insurance
- Recording fees
- Escrow/Settlement fee
- Other fees
Closing Cost Credits
Depending on how much of your eligible borrowing amount is used at the time of loan closing, you may be eligible for a credit toward your closing costs. When higher amounts are drawn this credit can be enough to completely offset the costs of obtaining a reverse mortgage.
Apply Now to get started with your reverse application.