What Is Reverse Mortgage | The Average Cost of a Reverse Mortgage

The Average Cost of a Reverse Mortgage

Just as with any home equity mortgage, there are various costs that will be incurred during the process of obtaining a reverse mortgage. Costs for a typical home equity mortgage include home owner’s insurance, origination fees, appraisal fees, and closing costs. The cost of a reverse mortgage is much the same, with a few subtle differences.

A reverse mortgage lender will require an origination fee. This is basically the fee that pays for the lender’s overhead costs of preparing the reverse mortgage. The amount of your origination fee will vary depending on the value of the home and the type of reverse mortgage that you receive. If you get a HUD reverse mortgage, you will pay either $2,000 or two percent of the maximum FHA limit, whichever is greater. Under the Fannie Mae Home Keepers loan, the origination fee will not be more than two percent of the value of the home.

Rather than being required to obtain home owner’s insurance, you will be required by the FHA to pay a mortgage insurance premium. This premium allows HUD to back reverse mortgage loans, and pay any amount due once the home has been sold to repay the loan. The premium also provides funding for HUD to ensure that your loan will be serviced regardless of what may happen to your loan service provider during the course of the reverse mortgage.

Like other home equity mortgages, you will be required to cover the cost of an appraiser in your reverse mortgage. The appraiser evaluates your home and determines the value of the home, as well as the amount of equity in the home. This cost is required, as the appraisal value of your home is one of the deciding factors for your reverse mortgage loan amount.

Closing costs and other cost for your reverse mortgage may also apply. These reverse mortgage costs may include credit reporting fees, document preparation, recording fees, courier fees, title insurance, and/or a survey of the property to determine boundaries. Overall, the cost of your reverse mortgage will equal thousands of dollars. The good news, however, is that all or most of the cost of your reverse mortgage will be rolled into the loan amount, so that up front costs are minimal.