Reverse mortgages vary in costs & fees from lender to lender, so for seniors who are interested in a reverse mortgage there is no easy way to simply get a HECM quote that is the lowest one since there is such a great difference in lenders fees. This was the case before Reverse Mortgage Lenders Direct came along, now with our free HECM reverse mortgage comparison it is fast & easy for us to compare the lenders then provide you with the best reverse mortgage quote. For seniors who are skeptical please realize that the reverse loan is a federally insured program that every lender has access to (HECM lenders) but instead of them all charging the same fees to simplify the process they choose to offer different loan fees – therefore the only real way of savings money is when you compare at least 3-4 lenders which we do for you at no cost – to save you time and money.
First and foremost you must have around $550 dollars to pay for the out of pocket reverse mortgage fees (which includes paying $50-100 for HUD counseling & the FHA appraisal fee of $300-$450 – none of this money goes to the lender but for the service providers directly). These fee has to be paid by for the consumer and there are laws in most states against the lenders covering these fees – We are able to find reverse mortgage counselors which do not charge a fee – and there is a desktop appraisal which charges only $100 first then the remainder to make sure that the home value is close to where it needs to be. These two costs are similar to refinancing costs minus the HUD counseling fee if any since that is not a requirement to refinance – do not hesitate to contact us about finding you a free HECM counselor.
Reverse Mortgages Typical Fees Involved
1.) Origination fees: Pays the lender for preparing all of your paperwork and processing your loan, which is known as originating the loan. A lender can charge you up to $2500 as a fee if the home is worth less than $125,000.
If the home is worth more, the lenders/banks can charge a 2% fee on the first $200,000, and then a 1% fee on any amount greater than $250,000.
There is an overall cap on fee’s and this simply means that no matter what your reverse mortgage will not costs more than $6,000. This fee is also very similar to how refinancing works – depending on the current market interest rates we are able to find you some no origination fee reverse mortgages if the market is right.
We can drastically reduce your closing costs by comparing reverse mortgages offers for you.
Example: $300,000 home
origination fee: ( 2% x $200,000= $4000 plus ( 1% of remaining $100,000 or $1,000 )
We can work for you to find lenders who wont charge you an origination fee – as time goes on and the reverse mortgage requirements tighten up this will become even more valuable. HUD has announced that starting on April 1st 2013 there will no longer be the option for a lump sum fixed rate reverse mortgage so for those seniors who want a fixed rate without fees the time is now to get a quote.
2.) Closing Costs: Since there are many parties involved including but not limited to appraisers, title surveyor, lawyers, title search, insurance, credit checks, mortgage taxes, and many more fees. All of the fees above have to be paid no matter who you decided to get a reverse mortgage with, some lenders will charge less than others, but you can expect to pay a few thousand dollars to cover these expenses.
3.) Mortgage Insurance Premium (MIP) HECM Loans all come with insurance which has to be paid in the form of upfront % of value of home (2% home’s value charged upfront) and also a 0.5% which is added to the interest rate on the loan for the HECM Standard.
HECM Standard mortgage insurance premium is 2% upfront
HECM Saver mortgage insurance premium is .01% upfront – substantially providing seniors with savings.
Why do you have to pay this insurance on your reverse mortgage loan
HECM insurance guarantees that
§ you receive your loan advances as long as you live
§ that you can live in property for as long as you live
§ debt can never be greater than value of your home is sold to repay loan
§ you will continue to receive payments if lender defaults
§ if you live much longer than average you will continue to receive payments
As you can see the government is taking on a large amount of risk by insuring these loans for your benefit but you do have to pay for this extra protection. As more reverse mortgage scams occur this is a great mandatory fee for consumers.
4.) Servicing fee Depending on your age and the life expectancy left, the servicing fee is a monthly fee set between $30-35 per month, which is paid for a reverse mortgage through a “set aside fund”. When you initially consider a reverse mortgage the bank/lenders will calculate the overall costs of the servicing fees and then create a “set aside” account with enough money to cover this fee over a predicted lifetime. This amount is deducted on a monthly basis and you do not have to worry about paying it out of pockets since it can be built into the loans.
5.) Reverse Mortgage Interest Rates The banks primary fees are interest on the loan, which in the case of a reverse mortgage start to actually increase the amount of owe over time. With a traditional mortgage every time you send a paycheck to pay mortgage you are essentially paying down principal part of loan and also the interest. Since with a reverse mortgage there are no payments the interest accrues on the loan and causes your reverse mortgage loan to increase in value over time. If you were to take out a reverse mortgage today, in 10 years time that loan will reflect the interest over the 10 year period.
While a reverse mortgage is an expensive option, most mortgage products are, and the best way to reduce the upfront costs is to shop around for the best interest rate & lowest closing fees which we help with. We provide our reverse mortgage comparison service for free to seniors who are considering a reverse mortgage to improve their retirement while also being mindful of the costs involved and who is trying to get the best deal possible.
If you are considering the reverse mortgage loan there is a high chance that you are also considering the following actions:
1.) selling your home
2.) taking a HELOC (home equity line of credit) or a home equity loan (possibility even a cash our mortgage refinance
Having options is great in your retirement, the costs difference of taking a reverse mortgage compare to #’s 1&2 above are not that grand and in some instances the reverse mortgage is considerably cheaper to do. News media has really created a bad name for the reverse mortgage because when it first launched there were really high fees involved and even though the program has changed to substantially reduce the fees the news/media kept portraying the image of it being expensive. Considering the fees of selling your home can easily cost (3% of the homes value) or a cash out refinance can compare to a HECM saver in cost, this gives you one less pros/cons to think about. With a reverse mortgage you will not have to sell the home – you can retire there and not worry about property values – because you wont have a monthly mortgage payments -if any equity is built in the home it belongs to you and when it comes time to leaving the home to the heirs the property is theirs and not the banks.