A senior reverse mortgage is a loan provided to seniors and elders based on the equity and value of their home. It is meant to be used to pay off mortgage debts while providing a steady stream of funds for living expenses. Like all loans, senior reverse mortgages come with some fees and costs that you will have to consider.
There are some charges you will have to pay upon application for the loan and before you are able to receive the reverse mortgage. Here is a list of them.
1. Appraisal Fees.
This involves an appraiser evaluating your home and deciding on its value in the market at the time. This is the first step in determining your loan amount, and the typical fee is around $450, though it differs by location. Should the appraiser decide that the house needs repairs, you will have to fix up the problem areas and call them back for a second visit. This follow-up can cost upwards of $100.
2. Initial Mortgage Insurance Premium.
This fee is charged during the loan closing and is made up of 2% of your total loan amount. It is meant to insure guarantees and is a government-charged tax.
3. Closing Fees. Closing fees are required in order to approve the loan, but some fees can be deducted or covered in the reverse mortgage itself, so they do not have to be directly paid for. Requirements differ by location, but some known closing fees include the following.
a)Credit report fee for tax liens verification ($20-$50)
b)Document preparation fee for completion of final documents ($75-$150)
c) Escrow fee that covers closing, titles and settlements ($150-800)
d) Flood certification fee that shows whether the house is on a flood plain ($20)
e) Courier fee that covers mailing charges ($50 or less)
f) Survey for boundary determination ($250 or less)
g) Recording fee for mortgage lien recording ($50-$500)
h) Pest inspection ($100 or less)
i) Title insurance (fee depends on loan size)
4. Loan Origination Fee. This charge is a standard fee that the senior reverse mortgage lender will charge you. There is a cap to the amount that can be charged from you, with the topmost maximum being $6,000, and several other caps beforehand that depend on the value of the house in question.
Throughout the time that you have the reverse mortgage, you will have some minor charges and fees every once in a while. Here are some to expect.
1. Interest. You will be charged interest for the funds that you receive, but only for the amount that you do withdraw. You will pay both ongoing and accumulated interest, but you do have the option of fixed interest or variable interest, which will be determined by the reverse mortgage plan you choose. However, these charges will not be paid until the loan is due – or in other words until you move out of the house.
2. Service fee. Most reverse mortgage lenders will charge a fee of $35 or less per month for their administrative services over the loan.
3. Responsibility charges. As you receive the senior reverse mortgage, you must continue to pay the standard fees that most homeowners pay, and you are required to ensure the proper upkeep of your home so that its value does not drop. This includes maintenance and insurance as well as property tax. Percentages of the loan must also be used to pay off remaining mortgage debt.