How much will a reverse mortgage cost?
You’ve done your upfront homework on reverse mortgages. You understand the basic eligibility requirements: borrowers must be at least 62 years of age, own the property as their primary residence, have substantial equity in the home, must not be delinquent on any federal debt, maintain the property in good condition, pay annual taxes and home owner’s insurance, and the borrowers must participate in a homeownership counseling program with a HUD-approved HECM counselor. Another requirement is the ability to pay the costs and fees associated with a reverse mortgage application and closing. Here are some of those common fees.
Loan Origination Fee
A loan origination fee is an upfront fee charged by a lender for putting together a new loan application. Origination fees for an HECM can be up to 2% of the loan amount, depending upon the value of the home. Under FHA-HUD regulations, the maximum origination fee a lender can charge is capped at $6,000.
Where the origination fee compensates the lender for all of the upfront documentation and information in the loan process, the service fee pays for the ongoing servicing and maintaining of your loan through its maturity. This is typically a monthly fee of $30-$35, depending on the interest rate of your reverse mortgage loan.
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Upfront mortgage insurance premium fee (MIP)
Not unlike a conventional home mortgage loan, borrowers of a reverse mortgage loan must also carry mortgage insurance—which can be financed as part of the loan. At the time of closing, an initial mortgage insurance premium fee of 2% must be paid.
Additional mortgage insurance fee
In addition to the upfront MIP fee, lenders charge an MIP fee over the life of the loan, which is 0.5% of the outstanding reverse mortgage balance.
There are additional third-party fees that the borrower will be required to pay upfront. These are the most common fees:
- An appraisal is required for a HECM. Fees vary by region but on average are $450.
- Title insurance, recording fees, surveys, inspections, mortgage taxes, and credit check fees may apply and will vary.
- A homeownership counseling fee.
Taking out a reverse mortgage shouldn’t be a spur-of-the-moment decision. When you are ready to learn more, we encourage you to speak with one of our Reverse Mortgage Professionals who can help walk you the cost and fees, as well as all of the benefits of a reverse mortgage loan.
Learn more about how people are using home equity conversion mortgages for purchasing homes:
Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.