The expenses incurred on reverse mortgage costs may be more or less similar to the costs incurred when an individual opts for a forward or a traditional mortgage loan program. The expenditure incurred for obtaining a loan for purchasing a home or refinancing ones mortgage loan in case of a traditional mortgage loan may be same as a reverse mortgage loan cost.
One may have to shell out money as reverse mortgage costs for the following:
Origination fees
Appraisal fee
Standard closing costs
Mortgage insurance premium for HECM or Home Equity Conversion Mortgage.
Since these reverse mortgage costs are capped, the proceeds of the reverse mortgage may fund the costs and charges of reverse mortgage.
Detailed information about the reverse mortgage costs are given below:
Origination Fee:
The borrower is required to shell out the origination fee for meeting the expenses, which the lender incurs for its marketing costs as well as office overhead while preparing the reverse mortgage.
In case of HomeKeeper reverse mortgage category, an origination fee of 2% is charged on the valuation of home.
In case of HECM or Home Equity Conversion Mortgage, the origination fee is 2% of claim amount (maximum) or greater of $2000. The HECM Program is the most widely applied for reverse mortgage program in the United States of America.
As far as the FHA is concerned, the origination fee varies from $4,003 to $7,256.
Appraisal fee:
The appraisal fee in case of reverse mortgage ranges from $300 to $400. An appraiser is an individual who estimates a current value of the borrower's home as per rates prevailing in the market. The appraiser is also responsible for finding out defects in the structure of the building and to see that the property is devoid of defects.
Mortgage Insurance Premium:
The mortgage insurance premium charged is equal to 2% of the claim amount. It may also be calculated on the value of the house. Also included in this cost is 0.5% as yearly premium on the outstanding loan amount.
Reverse mortgage costs also include the closing costs:
There are other costs incurred by the borrower, which is referred to as closing costs. These may include fees for the following:
Conducting survey
Title insurance
Recording
Pest inspection
Courier
Credit report
Settlement, Escrow account
For preparing documents
Flood certification