Question:

How big are the reverse mortgage costs?

Answer:

Reverse mortgage costs will include many of the common closing costs for a mortgage. Origination fee, house appraisal, mortgage insurance (optional) are among the common reverse mortgage closing costs.

HECM, Fannie Mae and Proprietary Reverse Mortgage Costs

The origination fee under HECM will vary between $2000 and 2% of the claimed amount. Since the amount with a reverse mortgage depends on the FHA loan limit of the county and the borrower's age, you'll usually be paying between $3000 and $6000.

The Fannie Mae's Home Keeper origination fee can't exceed 2% of your house value.

With proprietary reverse mortgage programs, origination fee may be costlier, but you may be getting better rates or payment options.

The origination fee may be rolled into the reverse mortgage itself with either program.

Appraisal fees cost around $300-450 and some $50-100 for a follow-up visit.

Mortgage insurance premium (MIP) is required under the HECM. You will be asked for 2% upfront and often rolled into the reverse mortgage, and 0.5% annually for the remaining loan balance. Thus, if you reverse mortgage lender goes out of business, you will still be getting your funds. Some private lenders do not ask for mortgage insurance, others will require that you have it. If you can get a decent reverse mortgage without paying MIP, you will be saving a lot in closing costs.

There are other reverse mortgage costs such as credit report, title insurance, escrow, etc. - a lot like a regular mortgage loan, that have to be taken into consideration.

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