HECM Reverse Loan Costs & Fees Explained
HECM Reverse Loan Costs and Fees
The reverse loan costs and fees are important to understand as you gather information to help you decide if a HECM reverse is right for you. As an effective retirement tool for Florida seniors, it has attractive features that make it a desirable solution, but as with any financial product, there are fees associated with this loan.
Let’s examine the fees and costs associated with HECM reverse mortgages to see how they may be rolled into the loan or deferred until the loan is due and how they may be worth it for qualified Florida homeowners looking to age in place or to improve their financial freedom.
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Important Disclosure
- The borrower remains responsible for property taxes, hazard insurance and home maintenance, and failure to pay these amounts may result in the loss of the home; and
- Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees.
- The loan balance grows over time and interest is charged on the outstanding balance
- At the conclusion of a reverse mortgage, the borrower must repay the loan and may have to sell the home or repay the loan from other proceeds
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment.
By allowing borrowers access to some of the equity in their homes, a reverse mortgage may provide both short term and long term benefits such as eliminating the need to sell their home, make monthly mortgage payments and the ability to age in place.
- Origination Fee – This fee pays for the processing of the loan application, which includes underwriting, appraisal, title search and closing costs. It can run from from 0.5% to 2% of the total loan amount, and translates to $750 to $3,000 on a $150,000 reverse mortgage loan. it’s important to remember that it covers the costs of the loan. As a one-time fee, it is typically rolled into the loan balance, therefore not paid out of pocket.
- Mortgage Insurance Premiums (MIPs) – Required on all HECM reverse mortgages, the upfront insurance premium protect both the borrower and the lender by ensuring that the loan can be repaid even if the home’s value declines or if the loan balance ever exceeds the home’s value. The MIP is equal to 2% of the home’s appraised value or the FHA lending limit, whichever is less. On a $500,000 home, the MIP would be $10,000. There is an additional 0.5% annual MIP accrued that is not paid until the end of the loan.
- Servicing Fee – Generally between $25 and $35 per month this fee covers the costs associated with loan administration activites like preparing and sending out monthly statements, tracking interest, and fees.
- Interest Rates and Fees – Interest rates on reverse mortgages can be fixed or adjustable and may be higher than traditional mortgage rates because the loan balance is not being paid down, over time, which results in compounding interest.
Want to get an immediate estimate of the amount you may qualify for?
Steps to Apply for a Reverse
Learn About the Pros & Cons
Advantages of Aging In Place
What Are The Qualifications?
Reverse Mortgage Loan Costs and Fees Recap
We hope that the list of reverse loan costs and fees we provided gave you a better understanding of what to expect. Our main goal is to ensure you have the information you need to make an educated decision about reverse mortgage loans and access to us as a trustworthy local Florida lender.
Reverse mortgages can be a great option for qualified Florida homeowners looking to augment their retirement income or have additional financial resources that allow them to maintain or improve the freedom and lifestyle they’ve earned over years of hard work and sacrifice.
If you would like to have a free, no obligation discussion about the reverse loan costs or details of the reverse mortgage loan products available, do not hesitate to give us a call, we’d love to meet with you at your home or have a talk on the phone to help you learn everything you need to know about the HECM reverse mortgage loan.
For more information give us a call at (800) 516-7155
Or use our reverse mortgage calculator to get an estimate of the proceeds you may qualify for!
Mortgage and Insurance Solutions Inc. NMLS #1124365