There are a few reverse mortgage fees that borrowers should understand prior to pursuing a loan. These fees include the:
Origination Fee: The origination fee is charged by the lender to cover the costs of supplying the loan. Lenders can charge up to 2% for the first $200,000 of the home’s value and 1% of any amount over $200,000. The entire origination fee can equal no more than $6,000.
Mortgage Insurance Premium (MIP): An upfront mortgage insurance premium of 2% or 0.01% will be charged depending on whether a borrower chooses the HECM Standard or HECM Saver. Borrowers will also be charged an annual MIP equal to 1.25% of the loan balance.
Appraisal Fee: An appraisal is required to determine the value of a borrower’s home. In addition to paying for an appraisal, borrowers will be required to pay a survey fee. This covers the cost of having a professional confirm the property’s boundaries.
Counseling: Before applying for a loan, seniors are required to attend one HUD-approved counseling session. This session can cost up to $125.
Loan Servicing Fees: Seniors who choose to receive their loan proceeds as a line of credit or in monthly installments will be required to pay monthly servicing fees. These fees typically cost between $30 and $35 and are financed into the loan.
Closing Costs: There are a number of closing costs that borrowers will be required to pay in order to close their loan. Some of these fees include the document preparation fee, courier fee, and a closing fee charged by the title company. Borrowers might also pay for a title search, title examination, and title insurance. These fees cover the cost of searching county records, reviewing the title, and insuring the lender against losses due to defects in the title.