Reverse Mortgage Fees

Do you understand reverse mortgage fees? In a previous post, which you can read here, we discussed the plethora of benefits of a reverse mortgage. One of items we did not dive into within that post were the fees associated with a reverse mortgage.

In general, reverse mortgage fees tend to be higher than traditional home loans. They will vary depending on how much money you borrow, the method by which you withdraw your proceeds, the appraised value of your home, credit score, etc.

Below are some of the fees you can expect to encounter when securing a reverse mortgage.

• HECM counseling fee: HECM stands for Home Equity Conversion Mortgage, this type of mortgage makes up for most reverse mortgages. Borrowers must attend mandatory counseling with an expert who has been certified by the U.S. Department of Housing Urban Development. The approximate fee is $125.00.
• Appraisal fees: A professional appraisal is always required for a reverse mortgage, and can cost anywhere between $300-$500.
• Third party closing costs: You can expect to pay many of the typical fees associated with a mortgage, from loan recording, to credit checks, title insurance, etc. Always be sure you get a complete breakdown of each fee from your lender.
• Initial mortgage insurance premium: You will have to pay an initial mortgage insurance premium at closing. The premium will be 0.5% or 2.5%, depending on whether you choose a lump sum or line of credit for your proceeds.
• Loan origination fees: Similar to a conventional mortgage, many lenders will charge a loan origination fee to underwrite and close your loan. You can expect to pay 2% on the first $200,000 of your home’s appraised value, and 1% on the amount over $200,000.

There are ongoing fees as well, such as annual mortgage insurance premiums, loan servicing fees and long-term property costs (such as home insurance, maintenance, etc.)

Before jumping into a reverse mortgage, speak to a reverse mortgage expert who can help you decide if it a good option for you.