How much will a reverse mortgage cost?
Fees and costs of a
reverse mortgage may average a bit higher than those for a conventional
loan, but remember, the interest rate is generally lower and there
are no up-front or out of pocket expenses. They
are regulated and capped by the U.S. Government, which guarantee
borrowers that there are no excessive fees. Most
borrowers elect to roll all fees and costs into the loan.
These costs break down
into 3 categories:
1. Mortgage
Insurance Premium-1/3 of the total cost
Insures that the value of the house is worth at least the amount
of the loan at the time. This amount is paid to the FHA.
2. Loan Origination
Fee-1/3 of the total cost
The compensation fee that is paid to the company that helped you
obtain the reverse mortgage.
3. Various
Title Company Expenses-1/3 of the total cost
Costs include:
Title policy
Appraisal
Survey (existing survey may be used)
Pest Inspection
Document Preparation Charges
Attorney Fees
Compensation to the Title Company
You should consider one thing while evaluating the fees. If you
plan to stay in your home, the closing costs will be spread out
over a number of years.
The loan is
not due and/or payable until the borrower no longer occupies the
home as a principal residence.
Rates are adjustable
monthly or annually.
Interest
on your loan, is added monthly. This will appear
on your monthly statement. Usually this interest is covered
by approximately the first 4% of appreciation that you accrued
on your home. Just to note, in 2004, the average house
appreciated by 8%.
