Understanding Reverse Mortgage Fees

There may be tiny doubt that many people can benefit from a reverse mortgage; fees for the mortgage can be a daunting consideration for some. A good understanding of the fees involved should be the very first thing someone should invest in before making a commitment to the mortgage. 

The origination fee is generally two percent of the maximum claim amount or $2,000.00, whichever is bigger. Overhead expenses incurred by the lender for making the loan ( marketing or administrative, for instance ) are paid through these fees. These fees are classic costs contained with HECM loans through the FHA, which account for approximately 90% of all reverse mortgages. The claim amount is the loan limit for the area of the FHA loan; a cost that may change widely from metropolitan areas to rural areas. This fee is generally included within the mortgage. 

Mortgage insurance is another fee that’s considered on reverse mortgages. This insurance is a warranty to the householder that should the lender or loan servicer go into Chapter 11, the governing body ensures the homeowner will still to be in a position to access their monies. Most significantly, mortgage insurance will ensure that the householder will never owe more than the cost of the home at the time the loan is repaid. This fee accounts for 2% of either the home price or the claim amount, whichever is less, with a premium assessed annually of 0.5% of the balance of the loan. 

In order to exactingly evaluate the value of the home, a valuer must be called in. The appraisal fee is a cost that will range between $300 and $400, with further chase up fees that could be assessed if any repairs are needed. The valuer’s job is to be sure the house is a good value, with no leaks, termites, structural defects or foundation issues. 

Closing costs are a well-recognized expense to anyone who’s had a home mortgage. Covering such services as recording charges, title insurance, credit reports, flood certification, escrow, courier fees, surveys and pest inspection, these amassed charges can sum up to a significant amount. 

A once per month fee that the government allows to be assessed against the account is referred to as a servicing set aside. This allows the loan servicer to take a specific amount of cash from the loan at the time of closing which will cover monthly fees charged for servicing the account. This single fee can amount to many thousands of dollars. 

Becoming familiar with reverse mortgage fees that can be assessed is necessary to your understanding of the process.

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