California Reverse Mortgages by your Sacramento Reverse Mortgage Provider

Reverse Mortgage Loan Fees and Costs!

by Zachary Scott

July 10, 2009

Since this is a hot topic about the reverse mortgage loan and there is confusion and misunderstanding related to the Fees and Costs lets clear the air. (Check out our Reverse Mortgage Glossary)

Many of the same costs that someone pays to buy a house purchase loan, or to refinance their existing mortgage, apply to reverse mortgages too.

Below is a more in-depth explanation of each sort of fee.

The origination fee covers a bank’s operating expenses including office overhead, promoting costs, etc.for making the reverse mortgage loan.

Mortgage Insurance Premium (MIP), under the HECM program, borrowers are charged a mortgage insurance premium, equal to 2 % of the maximum claim amount, or home price, whichever is less, and a once a year premium afterward equivalent to 0.5 p.c of the loan balance.

The MIP guarantees that if the company managing your account commonly called the loan servicer goes into Chapter 11, the government will step in and ensure you have continued access to your reverse mortgage loan funds.

Additionally, the MIP guarantees that you’ll never owe more than the value of your house when the HECM must be repaid.

An appraiser is in charge of allotting a current market valuation to your home.

Appraisal fees sometimes range between $350-$500.

As well as placing a value on the home, an appraiser must also ensure there are no major structural defects,ie a bad foundation, leaky roof, or termite damage.

Fed regulations remit that your house be structurally sound, and go along with all home safety codes, for the reverse mortgage to be made.

If the appraiser discovers property defects, you must hire a contractor to finish the repairs.

Once the repairs are completed, the same appraiser is paid for a second visit to make certain the repairs have been completed.

The price of the repairs could be funded in the loan and completed after the reverse mortgage is made .

Appraisers often charge $50-$75 bucks for the follow-up examination.

Other closing costs that are typically charged to a reverse mortgage borrower, include;

Credit score fee, confirms any federal tax liens, or other judgments, handed down against the borrower. Decides whether the property is located on a federally designated flood plane. Cost : sometimes under $20

Escrow, Settlement or Closing fee, generally contains a title search and numerous other needed closing services. Cost : $150-$450

Document preparation fee, is charged to prepare the final closing documents, including the mortgage note and other recordable items. Cost : $75-$150

Recording fee, charged to record the mortgage lien with the County Recorder’s Office. Cost : $50-$100

Courier fee, covers the cost of any overnight mailing of documents between the bank and the title company or loan financier. Cost : Generally under $50

Title insurance, is insurance that protects the bank ( lender’s policy ) or the buyer ( owner’s policy ) against any loss coming from disputes over ownership of a property. Varies by size of the loan, though in general, the bigger the loan amount, the higher the price of the title insurance.

Pest Inspection, is generally not required but determines whether the house is infested with any wood-destroying organisms, for example termites. Cost : generally under $100

Survey, is generally not required, but determines the official boundaries of the property. It’s typically ordered to make sure that any adjoining property has not coincidentally encroached on the reverse mortgage borrower’s property. Cost : Generally under $250

Service Fee Set-Aside The service fee set-aside is an amount of money subtracted from the available loan proceeds at closing to cover the projected costs of servicing your account. The servicing put aside is just a calculation and not a charge. Fed rules allow the loan servicer ( that might or may not be the same company as the originating lender ) to charge a once a month fee that ranges between $30-$35. The quantity of cash set-aside is basically set by the borrower’s age and life expectancy.

Remember, the reverse mortgage loan has fees and cost that are going to effect the remaining value or your home when you sell, move or die but the short term value (no mortgage payments, increased cash flow and leverage), and long term value (not having to refinance multiple times and lower overall fees and cost compared to a traditional mortgage) should not be overlooked or discounted.

This is not about a free lunch, it is about looking at your options in a non-emotional way.

We shop multiple reverse mortgage companies, to get your best reverse mortgage, to find out how much money you are entitled to just call…866-309-6626 or fill out the no obligation reverse mortgage company quote form…Upper right of this page…Thanks