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Reverse Mortgage Costs

In spite of the fact that the homeowner is "lending" the equity of the home to the reverse mortgage originator, there are costs involved that must be paid by the homeowner him or herself. One of the criticisms of the reverse mortgage process is that the loan origination fees can be much higher than normal mortgage origination fees are. The loan origination fee is capped at $2500, or 2 percent of the first $200,000 of appraised value, and 1 percent of the additional value – if any. There is an overall cap of $6,000, though. Traditional mortgage origination fees can be much lower than these are. There is also a requirement for the borrower to make a mortgage insurance payment of 2 percent of the appraised value.

Title insurance, title recording fees, attorney and county recording costs, these are all paid by the homeowner as well, thus adding to the costs of the reverse mortgage. An appraisal is required, as is a survey in some cases. The homeowner must pay all of these fees at the time of the reverse mortgage origination; however, all of the costs, with the exception of the real estate appraisal, can be paid from the proceeds of the loan.

There is a monthly service charge as well, which can cost generally between $20 and $40 dollars. This cost is added to the loan balance, though. With the costs involved in a reverse mortgage, the borrower should always be sure that he or she can afford to close on one before signing the papers. Even though the mortgage will make payments for the rest of his or her life, the initial closing costs could be much more than what the borrower can actually afford to pay. Shared to you by the QuantumFXBot.