Reverse Mortgage Closing Costs
Reverse mortgage closing costs and insurance premiums are easy to understand and this article will prove such!
Follow along and we will give you insights into reverse mortgage closing costs, fees and insurance premiums.
What reverse mortgage costs are required to be paid upfront and which are financed into the loan.
There are different costs and fees associated with a government insured HECM reverse mortgages and proprietary jumbo reverse mortgages.
We will also give insights to how these fees are calculated 🙂
Reverse Mortgage Costs Explained
When receiving a HECM reverse mortgage quote, or when speaking to a reverse mortgage advisor their are three main reverse mortgage cost and fee sets that you will notice.
Homeowners might notice that the reverse mortgage costs and fees can change depending on the appraised value of their home.
The reason for this is because many of the costs, fees and insurance premiums are actually calculated using the appraised value, or maximum claim amount.
The max claim amount is the FHA lending limit of $726,525. If a homeowners property appraises for over that FHA lending limit then for loan purposes everything will be based on the value of $726,525.
Initial Mortgage Insurance Premium
FHA charges a mortgage insurance premium on all HECM reverse mortgage loans.
This money is contributed to the FHA insurance fund to protect the homeowner and ensure that their available proceeds in a line of credit or monthly payment are protected. Also, protects the homeowner in the event the loan balance was ever higher than the value of the home.
This initial insurance premium is not paid out-of-pocket, but rather financed into the reverse mortgage loan once it funds.
It is a one-time reverse mortgage fee, so homeowners will never need to pay this premium ever again.
Even if the homeowner chooses to refinance their reverse mortgage into another reverse mortgage in the future they will not have to pay the original portion of the insurance premium that has already been paid.
Other Closing Costs
The other reverse mortgage closing costs are the general items that many have seen before when purchasing, and/or refinancing their home.
These are tangible items that need to be paid such as:
Document Preparation Fees
And any other costs that might be required for your reverse mortgage loan such as trust review, credit report, property tax cert, flood cert.
* The only reverse mortgage costs that may be required to be paid upfront are the appraisal and counseling fee.
However, some counseling agencies do allow for the fee to be financed if that is preferred by the homeowner.
Reverse Mortgage Origination Fee
The reverse mortgage origination fee is a fee that the lender charges to originate and process the reverse mortgage.
This fee is never required to be paid upfront and will always be financed in the reverse mortgage loan funding.
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Reverse Mortgage Fees and Rates
The interest rate on the reverse mortgage is also a cost associated with the reverse mortgage.
In a forward mortgage the interest is paid each month, so that is an out-of-pocket monthly fee.
Since a reverse mortgage does not require a monthly payment this interest amount accrues on the loan balance.
A homeowners has the ability to make a payment on their reverse mortgage loan, but it is not required.
The FHA also charges an ongoing mortgage insurance premium of .50% a month on the current loan balance.
To figure out the total interest rate that will accrue on the reverse mortgage a homeowner will make a simple calculation of (initial interest rate + .50% ongoing mortgage insurance premium).
Reverse Mortgage Costs Calculator
Now that you have a more detailed picture on how the reverse mortgage costs, fee and premiums work you might be looking for a reverse mortgage costs calculator.
In our experience the online reverse mortgage costs and fees calculators can show programs that may, or may not, be currently accessible.
We encourage you to use our ReverseAdvisors.org reverse mortgage advisor search.
It allows you to see top reverse mortgage companies and advisors that work in your state and might even specialize in your county.
ReverseAdvisors.org feels this is the best way for you to start to review your current reverse mortgage fees and costs available.