Reverse Mortgage Fees

There can be little doubt that many people can benefit from a reverse mortgage; fees for the mortgage, however, can be a daunting consideration for some. A good understanding of the fees involved should be the first thing a person should invest in before committing to the mortgage.
 
The origination fee is generally 2% of the maximum claim amount or $2,000.00, whichever is greater. Overhead expenses incurred by the lender for making the loan (marketing or administrative, for example) are paid through these fees. These fees are typical costs contained with HECM loans through the FHA, which account for roughly 90% of all reverse mortgages. The claim amount is the loan limit for the area of the FHA loan; a cost that can fluctuate widely from metropolitan areas to rural areas. This fee is generally included within the mortgage.
 
Mortgage insurance is another fee that is assessed on reverse mortgages. This insurance is a guarantee to the homeowner that should the lender or loan servicer go out of business, the government ensures that the homeowner will still to be able to access their monies. Most importantly, mortgage insurance will ensure that the homeowner will never owe more than the actual value of the home at the time the loan is repaid. This fee accounts for 2% of either the home value or the claim amount, whichever is less, along with a premium assessed annually of 0.5% of the balance of the loan.
 
In order to accurately assess the value of the home, an appraiser must be called in. The appraisal fee is a cost that can range between $300 and $400, with additional follow up fees that may be assessed if any repairs are required. The appraiser’s job is to make sure the home is a good value, with no leaks, termites, structural defects or foundation issues. 
 
Closing costs are a familiar expense to anyone who has had a home mortgage. Covering such services as recording fees, title insurance, credit reports, flood certification, escrow, courier fees, surveys and pest inspection, these accumulated fees can add up to a substantial amount.
 
A monthly fee that the government allows to be assessed against the account is called a servicing set aside. This allows the loan servicer to deduct a specific amount of money from the loan at the time of closing that will cover monthly fees charged for servicing the account. This single fee can amount to several thousands of dollars.
 
Becoming familiar with reverse mortgage fees that can be assessed is crucial to your understanding of the process.