TIME TO LEARN ALL ABOUT REVERSE MORTGAGE CLOSING COSTS

CLICK HERE FOR A REVERSE MORTGAGE QUOTE

FINALLY! AN IN-DEPTH LOOK AT REVERSE MORTGAGE CLOSING COSTS

To start, being fully transparent, we give our seniors the exact same list of reverse mortgage costs as we’re going to highlight for you below.

But first, to establish a benchmark, we’ll look at the cost for a senior to sell his or her home. We compare these costs because in our experience, many seniors end up choosing between either GETTING A REVERSE MORTGAGE or SELLING THEIR HOME. Although they’re doing research to figure out what’s right for them, they know they need to do something.

In MOST states, the cost of a real estate transaction is 6% of your home’s value, with another 1% as a property transfer tax. So, it costs approximately $28,000 to sell a $400,000 home.

***Just to set the record straight, this is a GENERALIZATION. We are not realtors, nor do we know where you live(it would be strange if we did). Please confirm exactly what your property transfer charges are IN YOUR COUNTY. Ok, thanks…fine print over***

 

TWO TYPES OF REVERSE MORTGAGE COSTS

There are two main types of reverse mortgage closing costs. First, we have OUT OF POCKET(or up-front) costs. Next, we have FINANCED fees. We’ll go over out of pocket first.

OUT OF POCKET REVERSE MORTGAGE CLOSING COSTS

These are what you’ve actually got to pay out of your wallet to get a reverse mortgage. Out of pocket reverse mortgage costs ALWAYS include

SOME RARE OUT OF POCKET REVERSE MORTGAGE COSTS

Those are the two MAIN out of pocket reverse mortgage closing costs. Others might include

Ok, that’s it for the out of pocket reverse mortgage costs. 96% of the time they just include counseling and appraisal. And to keep it as manageable as possible, just about every counseling agency and appraisal management company takes credit card for payment.

reverse mortgage costs reverse mortgage closing costs
Let’s learn what the typical reverse mortgage
costs are.

JUMBO REVERSE MORTGAGE CLOSING COSTS

This section should actually be called Jumbo Reverse Mortgage LACK OF CLOSING COSTS. What does this mean? Well, quickly…the majority of proprietary(or jumbo) reverse mortgages DO NOT CHARGE origination fees or IMIP. You’ll learn about both of these fees for traditional mortgages below; but just understand if you get a “Jumbo” you typically are only charged 3rd party fees(mostly title and recording). 

TRADITIONAL HECM FINANCED CLOSING COSTS

Now its time to go over the typical reverse mortgage closing costs for traditional HECM’s. They differ slightly from program to program, and state to state, but after reading this article you’ll understand exactly what the reverse mortgage costs are and why they exist. 

Ok, let’s jump right into it!

MORTGAGE INSURANCE PREMIUM(IMIP)

IMIP is the first reverse mortgage cost and is required on every FHA insured reverse mortgage(lenders all require it). Mortgage insurance renders reverse mortgages “non recourse”. This protects you and your heirs if the real estate market drops, like it did in 2008. Here’s an example of how this works. Martha got a reverse mortgage for $200,000 in 2007 when her home was worth $400,000. In the 2008 crash, Martha’s home value dropped to $240,000(she lived in Cape Coral, Florida, where property values got destroyed).

When she died in 2012, Martha owed $260,000(for this example let’s assume Martha’s home value stayed the same from 2008 to 2012). As you can see, there’s a $20,000 shortfall between what’s owed($260,000) and the home value($240,000).

Martha’s kids inherited her home, and they saw that the house was “Under Water”. Because of the FHA mortgage insurance premium, they could give up the deed to the lender in lieu of foreclosure, and the FHA reimbursed the lender for the shortfall.

IMIP ensures that the lender(or the government) CAN NOT go after the heirs, the estate, life insurance or any money passed down. Thus making the reverse mortgage safe and secure for the senior AND the heirs. The cost is 2% of the home value, rolled into the loan.

By the way, a PROPRIETARY REVERSE MORTGAGE does not charge for IMIP(although they have the same non-recourse protection).

ORIGINATION FEE

The origination fee is the next reverse mortgage cost, and is how the lender gets paid. Again, this reverse mortgage closing cost isn’t charged up front, rather it’s rolled into the loan(just like the IMIP). The origination fee is set by HUD, and it’s basically 2% of the first $200,000 and 1% of anything above that. It starts at $2500 and is capped at $6000.

Here’s a chart that shows how it works.

Home Value                Origination Fee

$0-125,000                  $2,500(this is the minimum)

$200,000                     $4,000

$300,000                     $5,000

$350,000                     $5,500

$400,000+                   $6,000

$800,000                     $6,000(as you can see $6,000 is the cap)

Similar to IMIP, a Proprietary Reverse Mortgage rarely includes origination charges(if your home is valued at $700,000 or more, you should at least look into a proprietary reverse mortgage).

THIRD PARTY REVERSE MORTGAGE CLOSING COSTS

The final type of reverse mortgage costs are “Third Party Fees”. These are disclosed on the loan comparison form(a page you get for your counseling session) as “Other Fees”. The majority of these fees are included on all residential mortgage loans(not just reverse mortgages). Here’s a list of what they are(the costs vary greatly by state).

WHY REVERSE MORTGAGE LENDERS SHOULD BE TRANSPARENT

Most reverse mortgage lenders aren’t transparent with their fees, which I personally think is silly. After all, every reverse mortgage cost is regulated by HUD and the FHA. In my opinion it’s far better for you to know EVERYTHING about reverse mortgages up front. Personally I don’t like surprises and neither should you!

With that said, if your home is worth about $700,000 or more, you should compare a Proprietary Reverse Mortgage with a traditional HECM. While we won’t go deep down that rabbit hole here, one main reason to consider the Proprietary Reverse Mortgage is fees. They don’t charge IMIP and for the most part they don’t charge origination fees either. A growing number also don’t charge “Other Costs” as well.  Doing the math for you, a Proprietary Reverse Mortgage might save you 90%+ on closing costs.

FINAL THOUGHTS ON REVERSE MORTGAGE COSTS

Reverse Mortgages do have fees, just like all other loan programs. Far more important that reverse mortgage closing costs, however, is the PURPOSE of the loan. What do you need a reverse mortgage to do for you? Will it help you save money on your monthly mortgage payments? Will it keep more of your money in investments? Can a reverse mortgage pay for the care your loved one needs to stay in her home?

As you can see there are “big picture” questions that are just as important(if not more) as the reverse mortgage costs. With that said, unlike other reverse mortgage lenders, our business has always been and will always be transparent about every aspect of the process.

If you’d like to learn more on how a reverse mortgage can work for yourself, a loved one or a client…

CALL US TOLL FREE AT (888) 309 9705, (561) 408 2628 OR

CLICK HERE FOR A FREE REVERSE MORTGAGE QUOTE