Much like a traditional mortgage, a reverse mortgage loan does have fees associated with securing it. The following is a list explaining common fees you may have to pay when getting your reverse mortgage loan.
Origination Fee – The origination fee covers the lenders operating expenses associated with making the reverse mortgage loan. This can include things like overhead, marketing and title searches.
A lender can charge a HECM 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 up to a cap of $6,000.
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 current market situation.
If the appraiser uncovers a significant problem you will be required to hire a contractor to fix the problem before obtaining your reverse mortgage loan. That same appraiser will come out again and re-inspect the property.
Mortgage Insurance Premium – The mortgage insurance premium is a fee associated with the HECM reverse mortgage loan. The initial MIP will be .5 percent or 2.5 percent, depending on the amount you request to be disbursed. Additionally, you will be charged an annual MIP that equals 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 that what your home is worth once the loan reaches maturity unless you choose to payoff the loan while you or a non-borrowing spouse are still living in the home.
Closing Costs – Closing costs that are generally included in a reverse mortgage loan are:
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These materials are not from HUD or FHA and were not approved by HUD or a government agency.
Reverse Mortgage Disclosure: At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds; charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees; the loan balance grows over time and interest is charged on the outstanding balance; the borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; and interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment.