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Reverse Mortgage Costs

Posted on: 28th Dec, 2005 02:33 am
Costs associated with reverse mortgage are comparatively higher than traditional mortgages. In total, the closing costs range from 4% to 8% of the loan amount. Check out the reverse mortgage costs given below.
  • Originating fees: It is paid to the lender for preparing the paperwork and processing your loan. Under the Housing and Economic recovery Act, 2008, the origination fee has been cut down to 2% of the first $200,000 of the principal loan amount and 1% of the remaining loan. The fee shouldn't exceed $6000 in total.

    The origination fee is capped at 2% of the loan limit or home value. But the cap may be adjusted on the basis of the annual percentage increase in the consumer price index. Under the law, lenders can't ask borrowers to purchase insurance, annuities etc as condition for getting reverse mortgage.

  • Third party fees: Third party costs include the fees required at the time of closing of the contract. Third party fees are the appraisal fee, attorney fee, title insurance fee, etc.

  • Insurance Premium: This type of premium guarantees that you will receive the promised loan amount in advance and you don't have to repay that amount as long as you stay in that house. For instance, the mortgage insurance premium or MIP offered under the HECM program guarantees you that if your lender goes out of business, the government will provide you with the loan funds.

    The MIP makes sure that you don't owe more than the value of your home when the HECM is to be paid off. The premium charged in HECM is equal to the lesser of the home value or 2% of the maximum amount you can claim when you lender goes out of business. In addition, the MIP includes an annual premium equal to 0.5% of the loan balance.
The costs can also be paid out of the loan proceeds. However, closing costs vary from one state to another. Know more about closing costs on your mortgage .
I am thinking of applying for reverse mortgage and I know that on my age i can qualify for the mortgage. I also found some details on it from your site. But I still have lots to clarify. Can u tell me whom should I approach? Should I consult a lender directly or is there any other way?
Posted on: 28th Dec, 2005 02:56 am
Hi,

It�s good that the information in our site could help you.

If you want, you can definitely consult a lender but it is advised that you meet an independent reverse mortgage counselor before applying for the loan. The lender may speak in favor of his loan programs and it may not be of much help. But the counselor will educate you on reverse mortgage and also inform you about other options that you can consider. He will be the best person to guide you in choosing the most suitable loan package.

Also, make sure that you have all the specific requirements for the loan and ask your lender for a good faith estimate of the costs involved in the reverse mortgage.

Thanks,
Jerry
Posted on: 28th Dec, 2005 03:07 am
Does it matter who I apply for my reverse mortgage loan through. A bank or a mortgage broker? are the fees the same or can that differ?
Posted on: 08th Jan, 2009 07:43 pm
Hey Lorraine Heffner,

I don't think it will matter much if you apply for a reverse mortgage either through a mortgage broker or a bank. As far as I know, the rates and fees are more or less the same.
Posted on: 08th Jan, 2009 09:55 pm
My mom is 84, she has 180000 tax debts, which have run up andis paying back a 150000 mortgage debt on her house- housevalue is about 700000 can sch still get a reverse mortgageg
Posted on: 19th Mar, 2009 03:15 am
Reverse mortgage is available if there is equity in the property. As your mom's property does not have equity, I doubt whether she would get a reverse mortgage.
Posted on: 19th Mar, 2009 10:56 pm
Is it adviseable to have an attorney present at the closing of a reverse mortgage? What does an attorney typically charge for this service?
Posted on: 28th Mar, 2009 07:41 am
Welcome hermangail,

It would be good for you if an attorney is present at the closing. However, the charges would differ from one attorney to another.
Posted on: 29th Mar, 2009 10:27 pm
I understand that under Reverse Mortgage rules, one must live in the home as principal residence the majority of the year. Can you clarify this--can one own a time-share of vacation home--what is majority of the year?
Posted on: 17th Jul, 2009 02:27 pm
well, majority is more than half, ann; so i guess the ruling would be that you must live there at least 6 months plus a day.

i'm not quite sure if you're asking if it is allowable to own a time share or vaction home, but that seems to be the question. you can definitely own either or both.
Posted on: 18th Jul, 2009 05:22 am
I plan to buy a condo at 98k. Use reverse mortage. I don't need any monthly money to live on out of house. How does this affect my benificeary after I die. Does he sell house and pay off loan. Does interest accumulate over years I am in house? Will that make total of house to be sold more than original cost?
Posted on: 27th Sep, 2009 07:45 am
there is some confusion. you want to purchase condo by means of reverse mortgage? is it true?
Posted on: 27th Sep, 2009 09:15 am
hi wilma,

the interest on the reverse mortgage will accumulate over the years. on your death, the entire reverse mortgage amount plus the interests will become due and your beneficiaries will have to pay it off. they will not be personally liable for the loan. but if they want to keep the home, they will have to refinance the property and satisfy the reverse mortgage amount. if they cannot refinance, the mortgage company will repossess the property and sell it off to recover the loan balance.

thanks,

jerry
Posted on: 30th Sep, 2009 05:51 am
>>you want to purchase condo by means of reverse mortgage? is it true?

Yes.
Posted on: 06th Nov, 2009 02:47 pm
>>Does he sell house and pay off loan.

If he wants. He can also refinance the Reverse Mortgage with a Forward Mortgage or Reverse Mortgage and keep the house.

>>Does interest accumulate over years I am in house?

Yes, it's a negative amortization mortgage.

>>Will that make total of house to be sold more than original cost?

If you live long enough, the Lender could end up being negative on the mortgage (if you owed more on the Reverse Mortgage then the house was worth).
Posted on: 06th Nov, 2009 02:57 pm
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