Reverse Mortgage Appraisal Fees
When considering a Reverse Mortgage, it is important to also consider all of the fees associated with the loan program. Although the biggest draw to taking out a Reverse Mortgage is the fact that approved borrowers don’t have to make principal and interest payments, there are still several other financial obligations that will need to be fulfilled. One of these is the Reverse Mortgage appraisal fee, which covers the cost of the required home appraisal.
How much does the appraisal cost?
While the cost of a Reverse Mortgage appraisal can vary by company and by location, it is typically around $450*. Furthermore, appraisal fees can also be influenced by factors such as the location, age and condition of the property.
Keep in mind that the appraiser is working for the lender, not for you, so don’t be surprised if he or she does not discuss their fee with you.
What goes into the appraisal process?
The FHA (which insures Reverse Mortgages) requires both an interior and exterior inspection of any home being financed with a Home Equity Conversion Mortgage (Reverse Mortgage). The appraisal must be completed by an FHA-approved appraiser. The Department of Housing and Urban Development (HUD) maintains a list of eligible appraisers in an online database.
The appraiser will make sure that the home is structurally sound, and complies with all home safety and local building codes. If the appraiser uncovers problems, the homeowner will need to hire a contractor to complete the necessary repairs. After the repairs are completed, the same appraiser will come out for another inspection to make sure the repairs have been completed properly. These follow-up visits typically cost around $125.*
According to the National Reverse Mortgage Lenders Association (NRMLA), homeowners may be able to pay the cost of the repairs with their Reverse Mortgage proceeds.
“If the estimated cost of the repairs is less than 15 percent of the Maximum Claim Amount, the cost of the repairs may be paid for with funds from the reverse mortgage loan and completed after the reverse mortgage is made. A “Repair Set-Aside” will be established from the reverse mortgage proceeds to pay fo rthe cost of the repairs. The homeowner will be responsible for getting the repairs completed in a timely manner.” – NRMLA
For more information on what goes into the appraisal process, there is a very informative article on the National Reverse Mortgage Lenders Association’s website.
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Why do I need a home appraisal?
The appraisal is necessary because it helps HUD ensure the property is sufficient collateral for the amount of the Reverse Mortgage. In addition, the FHA/HUD wants to make sure that the sale or refinance of the property will likely generate enough proceeds to pay off the loan. The appraiser will carefully inspect and analyze the condition of the home along with the neighborhood it is located within to determine its value. The appraiser will also include estimates of property taxes and hazard insurance, as required by HECM guidelines.
To learn more, feel free to contact a licensed Reverse Mortgage specialist serving your area.
*subject to change; based on data from April 2015