For a reverse mortgage, you should expect to pay most of the same costs required by those getting first and second mortgages. In this section, we will discuss two of the five required costs for getting a reverse mortgage; appraisal fees, servicing set-asides, and closing costs are discussed on their respective pages.
The first fee you will have to pay to get a reverse mortgage is the origination fee. This fee covers the lender’s operating expenses, such as office and marketing costs, for making your reverse mortgage. The HECM program, accounting for 90% of all reverse mortgages in the United States, requires that the fee be equal to either $2,000 or 2% of the maximum claim amount, whichever is greater. This fee generally ranges anywhere from $3,200 to $5,806. However, the good news is that the entire amount of the origination fee may be financed as part of your mortgage.
The second required cost is the mortgage insurance premium (MIP). With HECM , borrowing homeowners are charged an amount equal to 2% of the maximum claim amount or home value, whichever is less, plus an annual premium equal to 1/2% of the total loan balance. The MIP is a guarantee that if your servicer, the company in charge of your account, goes out of business, the government will maker sure that you still have access to your funds. In addition, it guarantees that you will never owe more than the value of your home upon repayment.
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