Reverse Mortgage fees and costs can vary widely. Let’s take a look at what you can expect. We’ll explain the different reverse mortgage costs as we forge ahead in this article. Further, we’ll delve into a big question; “is there anything that can be done to reduce the fees associated with getting a reverse mortgage loan?”. Also, you might be wondering if there is such thing as a no cost reverse
The 1st Thing You Should Know About Reverse Mortgage Closing Costs
Residential lending is regulated pretty heavily these days. FHA / HUD regulates and dictates what fees can be charged for getting a reverse mortgage. A lender or broker is not allowed to charge any more than what FHA mandates they charge.
Does this mean that the reverse mortgage fees are inexpensive? The answer there is “yes” and “no”. We’ll explain further later on, but in some cases the reverse mortgage closing costs are not the cheapest. However, I think It’s important to remember that PRICE is what you pay & VALUE is what you get. Some of the reverse mortgage closing costs are WELL worth every cent.
So, What Are The Reverse Mortgage Fees and Costs?
Anytime you do a reverse mortgage, there are three potential buckets of fees. Some of these fees you may have seen before while other fees may be more unfamiliar to you. The nice thing about MOST of the reverse mortgage closing costs is that most of them can be handled at closing. There are only two potential up front fees.
The First Bucket of Reverse Mortgage Costs:
The reverse mortgage is insured by FHA. Hence, the first type of fee is the FHA Mortgage Insurance Premium (aka MIP). This is the most worthwhile fee there is. This is where that phrase “price is what you pay and value is what you get” comes into play.
The FHA mortgage insurance premium is what makes the reverse mortgage a non-recourse loan. In plain English, non-recourse means that the home is the only asset that can be used to repay the loan. No other assets can be touched to repay the loan. If you take the loan and the value of your home drops below what you owe, no other assets can be touched to repay the loan when you sell your home or when your heirs sell the home. In a case like this, the home sale will cover what it can and the FHA mortgage insurance will pay any shortfall. Hence, you don’t have to worry about leaving your children with a debt greater than what the home is worth.
How much is the MIP?
The MIP is either 2.5% of the appraised value OR .5% of the appraised value. Good Reverse Mortgage Loan Advisors can explain what determines your MIP cost. Email Reverse Mortgage Loan Advisors for more info at Info@ReverseMortgageLoanAdvisors.com
The Second Bucket of Reverse Mortgage Fees and Costs:
The second reverse mortgage related fee is an origination fee. This fee is regulated by HUD. HUD / FHA dictates how much a lender or broker is allowed to charge as an origination fee. The origination fee is the lender’s professional fee for originating, processing, underwriting, and funding your reverse mortgage. It can range from $2500.00 to $6000.00. It CAN also be zero.
***Reverse Mortgage Fees and Costs PRO TIP****
FHA dictates the maximum amount a lender or broker can charge. However, a lender can choose to reduce the standard origination fee. However, sometimes they can waive it altogether. Don’t forget to ask. FYI, it’s normally the loan amount that dictates a lender’s ability to waive or reduce the origination charge. Sometimes you can even find a lender or broker that can offer a lender credit to pay some of the other reverse mortgage fees. This also means that you might be able to get a “no cost reverse mortgage”. Again, it just depends on the loan amount taken at closing.
The Third Bucket of Reverse Mortgage Fees and Costs:
This bucket of fees encumbers much of the normal fees you’ve seen with a traditional mortgage. These are what most lenders would call third party fees (fees that are required for the transaction, but don’t get paid to the lender or broker). This would include the following such fees (may not be all inclusive): credit report, tax service, flood certification, doc prep, MER’s registration, settlement, attorney or closing fee, title insurance, notary, HECM counseling fee, title endorsements, title searches, county recording fees, and in some states mortgage related taxes. There may also be an attorney review if you’re hoping to fund your reverse mortgage in a trust. Generally, the total amount adds up to about $2000.00. Sometimes this amount will be less and sometimes it’s going to be more. Each state is different. Also, the loan amount will dictate how much the 3rd party fees are.
At the end of the day the reverse mortgage fees and costs can vary greatly. In fact, it depends on the state you live in. Moreover it depends on the amount you take at closing. In addition, the percentage of your total loan you need to utilize at closing also dictates what the reverse mortgage fees will be. The biggest question to ask oneself is, “how does this benefit me” or “does the benefit out way the cost?”.
The other variable in terms of cost is the lender or broker you’re using. Some lenders make it a practice to charge the maximum amount allowable by FHA. Other, smaller to medium brokers or lenders don’t always have that same mentality.
Lastly, here is a question to ponder. Who are some of the highest paid people in America? Here’s an answer or two; actors and actresses. If the lender you’re looking at has a celebrity spokesperson, then there’s a big chance you’re not getting the best value.
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www.ReverseMortgageLoanAdvisors.com Is not a lender, bank, or mortgage broker, nor is it affiliated with HUD or FHA. Reverse Mortgage Loan Advisors is simply a website designed to offer information about the FHA insured reverse mortgage program. However, the owner of the site is licensed as a reverse mortgage specialist in several states. Anyone that inquires and requests more information may be contacted by the owner of this site. If the owner of this site is not licensed to conduct business in the state you reside, one of our affiliates will contact you instead.