Senior Reverse Mortgage

No loan is completely free. For a loan to be a worthwhile investment, lenders must charge their borrowers interest, closing costs and other fees. However, according to some experts, reverse mortgage fees are substantially higher than those charged on other types of home loans. To help you understand what you can expect to pay, here is a breakdown of the common reverse mortgage fees charged to borrowers.

Three Major Reverse Mortgage Fees

There are three major fees that borrowers incur during the loan process. The first fee is the origination fee. Origination fees are based on property value and are limited to a maximum of $6,000. In addition to the origination fee, borrowers must also pay for an appraisal. This typically costs $300 to $450 and can be financed into the loan.

Depending on the loan product you choose, your largest cost might be your upfront mortgage insurance premium (MIP). If you choose the HECM Standard, you will be charged an upfront premium equal to 2% of your claim amount. The HECM Saver carries a much lower upfront premium of 0.01%. Both loan products also carry an annual MIP that will equal 1.25% of your current loan balance.

Closing Costs and Servicing Fees

If you decide to get a reverse mortgage, you will also be expected to pay certain fees in order to close and maintain your loan. Common closing costs include a credit report fee, survey fee, pest inspection fee, flood certification fee, courier fee, closing fee and title insurance. Some of these fees, like the credit report fee, only cost around $20, while others can come to $100 or more.

Borrowers who choose to receive their proceeds as a line of credit or in monthly payments will also be charged monthly servicing fees. These fees are charged to cover the cost of maintaining a borrower’s account. Servicing fees typically cost between $30 and $35 and are factored into the loan.

While there are several fees associated with reverse mortgages, many of these fees are the same as those charged on forward mortgages and home equity loans. It is also important to understand that all reverse mortgage fees can be financed into the loan. This makes it possible for seniors to get a reverse mortgage without paying any out-of-pocket costs.