Introduction to Reverse Mortgage Fees

There are fees associated with the reverse mortgage loan aside from the interest payments. If you have any question regarding the fees, be sure to discuss them with your local reverse mortgage lender and have them answer all of your inquiries, as you are entitled to know. Acquiring reverse mortgage loans are is perhaps one of the last critical financial decisions that you will make in your life. Therefore it is important to check out any hidden fees or costs that are not readily seen in the contract.

The basic charges of a reverse mortgage loan includes three types of fees: a one-time origination fee, closing costs, and a monthly servicing fee.   The origination and closing fees are payable at closing, while the servicing fee is charged monthly basis.

Origination Fee 

An origination fee is a cost paid to your reverse mortgage lender for processing the loan application. Most origination fee is stated in the form of points. A point is one percent of the mortgage amount. This fee covers the administrative cost in preparing and evaluating the loan. The origination fee should not exceed $2,000 or 2% of adjusted property value, whichever is greater. In other words, if your adjusted property value is less than $1,000, you will not be charged more than $2,000.   If you adjusted property value is, for example, $2,000, the lender can charge up to 2% of that value, or $4,000.  Remember, these are maximums that can be charged to you, so negotiating this fee would be in your best interest.

Other Closing Costs

Closing costs are fees charged to the borrower to cover the administrative process to complete the transaction of the reverse annuity loan. The services that is covered by these costs include a title search, a title insurance, appraisal, survey, required inspection, taxes, and recording fees. These tasks are all necessary to complete the transaction and are therefore shouldered by the borrower.

Closing costs vary from one locality to another and varies within the locality itself due to changes in property values. It follows that higher mortgage values will demand higher closing costs.

There are other possible closing costs that can be associated with your reverse mortgage loan. This matrix of services includes, but may not be limited to: (a) appraisal, (b) credit report, (c) title insurance, (d) document preparation, (e) recording fees, (f) endorsements, (g) escrow/settlement fee, (h) termite inspection; (i) flood zone certification, (j) attorney's fee, (k) intangible tax, (l) state residential funding fee, and (m) courier fees.

In reverse mortgage loans, closing costs can be financed through your loan balance. However, certain fees such as appraisals and infection may be classified as immediate costs due to the involvement of third party companies and should be paid as demanded. If you choose to finance these costs, there will be less money available for you and you will be compelled to pay the interest charged with the added costs.

Servicing Fee

The monthly servicing fee on your Home Keeper Mortgage covers the monthly cost of the administrative that keep your loan going.  This is a flat fee charged to the balance of your loan each month. This fee is capped by Fannie Mae but decided by your reverse mortgage lender that ranged between $15 and $35 per month.