Reverse Mortgage Fees & Requirements
Reverse Mortgage Fees
Reverse mortgage fees are something of which many people are intimidated. This should not be the case! Though there are fees associated with reverse mortgages, they can be easily understood by arming yourself with the proper education.
Reverse Mortgage Origination Fee
A reverse mortgage origination fee is similar to the origination fee of traditional loans. It is a fee that is charged by the lender for the work that is done on your loan. However, with HECM reverse mortgages, this fee is capped and regualted by the government. The reverse mortgage origination fee can be up to $6,000 depending on the loan amount. The maximum origination fee that can be charged is 2% of the first $200,000 of the maximum claim amount and 1% of anything after that, up to $6,000. For maximum claim amounts lower then $125,000, the maximum origination fee is $2,500. This fee can be negotiated or waived depending on your specific situation.
Reverse Mortgage Upfront Mortgage Insurance Fee
The upfront mortgage insurance premium fee is something that can differ by loan program, but NOT by lender. The standard reverse mortgage charges 2% of the maximum claim amount for this fee and the Saver charges .01% of the maximum claim amount. This reverse mortgage fee goes directly to the Federal Housing Administration as insurance. This fee allows your reverse mortgage to have all the benefits of a federally-insured loan.
Reverse Mortgage Servicing Fee
A reverse mortgage servicing fee is a fee that can be charged by a lender for servicing the loan. This is a monthly fee for as long as you have the loan, but it is often waived depending on the loan program you choose. The fee generally ranges from $25-$35 each month and is not required to be paid out of pocket.
Reverse Mortgage Counseling Fee
The fee for counseling can vary. At most places, it is $125 and you can pay immediately or have paid out of your loan proceeds. Recently, many HUD-approved counselors have gotten grants from the federal administration which has allowed them to waive any charges for their services. Consult with your reverse mortgage specialist to discern if they know counselors that are still free of charge.
Reverse Mortgage Appraisal Fee
The appraisal fee generally is between $350 and $500 depending on where you live and the features of your home. This fee is not controlled by the lender, but rather the appraisal management company.
Other Reverse Mortgage Fees
There may be other reverse mortgage fees that you are required to pay. Most of these are not out of pocket costs, but rather fees paid out of your loan proceeds. These reverse mortgage fees are similar to other type of mortgage fees and include, but are not limited to: title fees, mortgage tax, and reinspection fees.
Reverse Mortgage Requirements
Reverse mortgages are unique in that they do not require income or credit requirements to obtain. It is recognized that they are used often to supplement income and better people’s financial situations which is why they do not have stringent requirements like so many other mortgage products. The only requirements necessary for obtaining a reverse mortgage are:
- Any and all homeowners on title must be at least 62 years of age.
- You must live in the home as your primary residence.
After obtaining the reverse mortgage, you still own your home. That being said, you are still responsible for the things you were responsible for before the reverse mortgage. These things include:
- Paying for homeowner’s insurance.
- Paying any real estate taxes.
- Remaining current on home maintenance.
With a traditional mortgage, many people escrow their property taxes and homeowner’s insurance with their mortgage payment. Because a reverse mortgage does not require any monthly mortgage payments, these things are no longer escrowed. It is important to make certain that you will be able to afford these resonsibilities. If you do not remain current on homeowner’s insurance, real estate taxes, or home maintenance, it is possible for the reverse mortgage to become due and payable immediately.