What Are The Fees?
As with any mortgage, there are costs associated with a reverse mortgage. The three largest closing costs are typically FHA mortgage insurance, the origination fee, and escrow fees. The fees are almost never out-of-pocket expenses. They are covered in the mortgage itself. The only costs that are typically paid out of pocket are the required counseling fees and an appraisal fee.
FHA Mortgage Insurance
With a HECM reverse mortgage loan, the borrower pays an initial Mortgage Insurance Premium (MIP), as well as an annual MIP of 1.25 percent. The HECM reverse mortgage is a “non-recourse” loan. In other words, if you sell your home to repay the loan, you will never owe more than the loan balance or the value of the property, whichever is less. And no assets other than the home must be used to repay the debt. If the lender becomes insolvent or otherwise fails to make payments due the borrower, MIP ensures that the borrower will continue to receive their payments.
The origination fee is what the lender earns on the loan. The origination fee is set by a FHA formula to determine what the lender can charge.
A title is required for all mortgages whether reverse or conventional. The largest part of title fees is title insurance.
An appraisal is required to determine your home’s value. A reverse mortgage appraisal is conducted by an FHA-approved appraiser and follows specific FHA guidelines that require more documentation than a typical appraisal. The cost of the appraisal can vary.
Other fees may include:
- Wire Fee
- Credit Report
Find out if a reverse mortgage is right for you.
Reverse mortgages are available to most homeowners that are 62 years of age or older with equity in their home. To find out if you qualify or to get your questions answered, please contact us for a no-obligation, no-pressure consultation. We're local mortgage professionals that provide straight and honest answers without the hard sell.