What kind of fees am I going to pay with the HECM?

The fees may be pretty steep on reverse mortgages. Here is what you might expect:

Origination fee

It’ll vary by lender, yet with home equity conversion mortgages, it is capped at 2 percent of the initial $200,000 of the property’s value and 1 percent of the rest of the value. The total will be capped at $6,000.

Home appraisal

No one, unfortunately, will take your word for what the house is worth. According to the NRMLA, official appraisals average $450.

Closing costs

Do you recall all of the fees you paid as you closed on your main mortgage? They also apply here and might involve fees for title searches, credit reports, preparation of documents, and a lot more. The total–that’s dependent upon your location and lender–might run you anywhere from several hundred dollars to perhaps a couple of thousand.

Service fees

According to the NRMLA, the lender might charge a fixed month-to-month fee, which typically is capped at $35. The money is set apart during closing, and as the total is based on your life expectancy and age, it might be several thousand dollars. Additional lenders might roll service charges into the interest rate of the loan.

Mortgage insurance

If you determine to get an HECM, you’ll be on the hook for a MIP or annual mortgage insurance premium. This mortgage insurance premium will do two things: it’ll ensure that you will still get the funds if the lender closes shop, and it’ll ensure that you will not owe more than the house is worth as the HECM for purchase has to be paid back. At first, mortgage insurance premium is based upon the quantity of funds you get through the HECM within year one. So long as you do not take more than 60 percent of your money, the mortgage insurance premium is going to be 0.5 percent of the value of your home. However, this figure balloons to 2.5 percent if you take over 60 percent of the money. And, in both instances, it’ll adjust to 1.25 percent a year. The mortgage insurance premium will accrue over time and is going to be due as you pay back the reverse mortgage.

If you are considering getting a reverse mortgage, you potentially do not have thousands of dollars lying around in order to cover those fees. Many lenders simply will roll them into your loan, so you do not pay out-of-pocket.

To hear more about our HECM for purchase, contact Longbridge Financial at 855-523-4326.