Fees
Closing Fees
The three biggest fees for a reverse mortgage are financed into the loan, the FHA mortgage insurance, origination and title insurance. The smaller costs are paid out of pocket, they are counseling and the appraisal.
Mortgage insurance
The insurance premium is 2% of the property’s value and has three guarantees:
- The senior can not “outlive” the loan
- The estate will not be responsible if the payoff balance exceeds the home value
- The FHA will pay out the loan if the lender financially cannot
Origination fee
The fee is set by law with the following restrictions
- Minimum of $2,500
- Maximum of $6,000
- The amount is 2% of the first $200,000 of property value and 1% of the second $200,000 of value
Title fees
- Title insurance
- Title examination
- Title settlement
- Recording
- Delivery
- Notary
- Doc prep
- Payoff (if necessary)
More closing costs
- Wire fee
- Counseling
- Flood certificate
Appraisal
The appraisal is what determines the legal value of the property. A reverse mortgage appraisal is required to be completed by an FHA approved appraiser with the official reverse mortgage documents. With these special documents, the appraisal is more typical appraisal and is about $500.
Interest
Interest does accrue on the balance and the balance will continue to grow on a reverse mortgage because no payments are being made on the loan. The adjustable rate has remained between 3% to 5% in the past ten years.
