Reverse Mortgage CostsThere have been a lot of talk about reverse mortgage fees and whether or not a reverse mortgage takes advantage of seniors. We have an explanation of each of the main fees associated with a reverse mortgage:
- Origination Fee
The origination fee is the loan fee charged by mortgage companies. The origination fee is about 2% of the loan amount. The government has set limits capping the amount that a lender can charge at $6,000, no matter what the loan amount is. The minimum fee is $2,500. A lot of lenders will allow borrowers to finance the whole origination fee into the mortgage. As a result of being able to roll the fee into the reverse mortgage, lenders will advertise "No Out of Pocket" reverse mortgages to seniors.
- Reverse Mortgage Insurance
Any HECM reverse mortgages are required by HUD to have mortgage insurance to protect against a property value declining in value. The mortgage insurance premium comes at a hefty cost, 2% of the property value plus an additional annual 1.25% of the loan balance. There is a hard cap of $625,000 for HECMs. For those looking to borrow more than $625,000 will need to look for a jumbo reverse mortgage lender.
This is where HECM Saver loans will save borrowers money. Instead of having to pay up to $6,000 in insurance, the cost of the insurance will be only be .01% of the loan.
- 3rd Party Closing Fees
These fees include anything from title searches, inspections, appraisals, recording fees, local taxes, state taxes, federal taxes, postage and other service fees. The amount of these fees will vary from different lenders but one can expect the cost to be anywhere from $1,000 to $1,600.