Georgia Reverse Mortgage Costs and Interest Rates
The cost of getting a Georgia reverse mortgage from a private sector lender may exceed the costs of other types of mortgage or equity conversion loans.Exact costs depend on the particular Georgia reverse mortgage program the borrower acquires.
For the most popular type of Georgia reverse mortgage, the FHA-insured Home Equity Conversion Mortgage (HECM), there is an insurance premium of 2% of the loan and a 2% origination fee on the first $200,000 of home value and 1% up to $417,000 in home value capped at $6,000 in addition to normal closing costs, which are typically several thousand dollars, but vary depending on the third-party costs (appraisal fees, title searches, etc.) which must be undertaken.
In addition, a monthly service charge (between $25 and $35) is usually added to the total amount of the loan (not paid out of pocket). The costs of a Georgia reverse mortgage can typically be financed with the proceeds of the loan itself, with the costs and fees being rolled directly into the principal balance of the loan, rather than paid by the borrower in cash.
While this does permit borrowers with little or no available cash to get a Georgia reverse mortgage, it means that the initial loan principal will be increased, and consequently, that the fees will begin accruing interest.
Since there are no payments made during the course of the loan, the compound interest accrued on the principal plus fees are added to the principal of the loan.
Interest rates on the Georgia reverse mortgages are determined on a program-by-program basis, because the loans are secured by the home itself, and backed by HUD, the interest rate should always be below any other available interest rate in the standard mortgage marketplace for an FHA reverse mortgage.
Prior to 2007, all major Georgia reverse mortgage programs had adjustable interest rates.
Such adjustable rate Georgia reverse mortgages are still being offered which are adjusted on a monthly or annual rate up to a maximum rate.
Several of our lenders now offer FHA HECM reverse mortgages that have fixed interest rates.
Some of these mortgages have interest rates that are similar to the current FHA/VA rate plus the mandatory
The loan ends when the homeowner dies, sells the house, or, depending on the loan conditions, moves out of the house for 12 consecutive months (for example, to go into an assisted living home or due to physical or mental illness the borrower is not able to live in the property on which the loan has been taken).
At that point, the Georgia reverse mortgage can be paid off with the proceeds of the sale of the house, or if the borrower has died, the property can be refinanced by the heirs of the homeowner's estate with a regular mortgage.
If the proceeds exceed the loan amount including compounded interest and fees, the owner of the house receives the difference. If the owner has died, the heirs receive the difference.
For cases where the proceeds are not sufficient to pay off the loan, then the bank (or Mortgage Insurance which the bank has on the loan) absorbs the difference.
The technical term for this cap on debt is "non-recourse limit." It means that the lender does not have legal recourse to anything other than the value of the home when the loan is to be paid off.
In most cases when the borrower moves out of the property or dies, as long as the borrower (or his estate) provides proof to the lender that he/she is attempting to sell the home or obtain financing to pay off the outstanding debt, the investor will allow him up to one year to do so.
After the one year extension period is up, the lender cannot provide any further extension of time to the borrower (or estate).
More Georgia Reverse Mortgage Loan Information:
Georgia Reverse Mortgage Requirements | Georgia Reverse Mortgage Costs and Interest Rates | When the Georgia Reverse Mortgage Loan Ends | Georgia Reverse Mortgage Proceeds