How Much Does The Reverse Mortgage Cost
The reverse mortgage cost is formed by several items, which I go through in this article point by point. You may remember, that the final costs and fees will be calculated along your special situation and needs.
1. A Typical Reverse Mortgage Cost Is Appraisal Fee.
The responsibility of the appraiser is to assign a current market value for your home. The fee, which the appraiser takes varies from $ 300 to $ 400.
Another important job is, that the appraiser checks, that your home has no bad structural damages, like leaky roof or termite damages. Your home must fulfil the home safety codes, so that the reverse mortgage agreement can be made.
If the damages must be repaired, the appraiser has the legitimate right to make a new visit and to check, that the repairs fulfil the code. This another check will cost between $ 50 to $ 75. This reverse mortgage cost, actually both of them, can be made after the reverse mortgage loan agreement is done and you can cover these costs with your new loan.
2. The Origination Fee.
This reverse mortgage cost is meant to cover such costs, which the lender has to pay, like his overhead costs and marketing costs.
One example: in HECM program, which is the most popular in US, the origination fee is 2 % on the initial 200.000 maximum claim amount and 1 % on the balance after that with a cap of $ 6.000.
3. The Mortgage Insurance Premium.
In HECM program the borrower must pay an obligatory mortgage insurance premium. This reverse mortgage cost protects you in two ways. If the servicer, the company which manages your loan, goes into bankruptcy, the government step in and guarantees that you will get the funds, which belong to you.
Or if the selling price of your home cannot cover the full amount of the reverse mortgage costs, the difference between the costs and the selling price will be paid from this insurance. You will never owe more than the value of your home and your other assets will never be used for reverse loan back payment.
The cost of the mortgage insurance equals to 2 percent of the maximum claim amount, or home value, whichever is less, plus an annual premium thereafter equal to 0.5 percent of the reverse mortgage loan balance.
4. The List Of The Closing Costs.
A. Cost of the credit report. Determines every federal tax lien or other judgment, which is handed down against the borrower. Cost: Usually under $20.
B. Cost of courier. This fee covers the expenditures of every courier mailing of documents between the title company and the lender or loan investor. Cost: Usually under $50.
C. Cost to prepare documents. This fee is paid for preparing the closing documents. Includes the mortgage note and other recordable items. Cost: Usually $75-$150.
D. Cost of escrow, settlement or closing. Generally covers the title search and several other required closing expenditures. Cost: Usually $150-$450.
E. Cost of the flood certification. Shows whether the property is located on a federally determined flood plane. Cost: Usually under $20.
F. Cost of the recording. This covers the jobs to record the mortgage lien with the County Recorders Office. Cost: Usually $50-$100.
G. Cost of title insurance. The idea of this insurance is to protect the lender or the buyer against the losses from disputes over the property ownership. Depends on the loan size. The bigger loan you take, the bigger is the cost of the title insurance.
H. Cost of pest inspection. The idea of the pest inspection is to show, if the home is infested with the termites or alike. Cost: Usually under $100.
I. Cost of the survey. This shows the boundaries of the property. Is normally ordered to make sure that the neighbouring property has not inadvertently encroached on the reverse mortgage borrowers property. Cost: Usually under $250.
5. Service Fee Set Aside.
Federal regulations allow, that the servicer can charge a monthly service payment, which varies from $ 25 to $ 35. This cost covers the costs, which will arise from servicing your account. They will be paid, when the loan will be closed and can rise to several thousands of dollars.
As you see, the reverse mortgage cost is actually a list of different costs and fees. One useful and helpful thing is to visit the federal counselor, who is an expert in these costs and can tell, how the costs and fees behave in your particular case.
by: Juhani Tontti