Fees, Cost & Repayment

The fees and costs of a reverse mortgage typically run $5,000-$8,000. There are no up front costs because all fees and costs are generally added to the loan.

The costs associated with a reverse mortgage break down into 3 categories:
1. Mortgage Insurance Premium – 1/3 of total cost
This is paid to FHA. It is insurance which insures that when you die, the value of the house is worth at least the amount of the loan at that time.

2. Loan Origination Fee – 1/3 of total cost
This is the compensation paid to the company that helps you obtain the reverse mortgage. On average, the compensation received by a mortgage company on a reverse mortgage is 50% of what the company would receive on a traditional, forward mortgage. Accordingly, the traditional mortgage industry has not spent a lot of money advertising and educating the public about reverse mortgages. That may explain why you haven’t heard much about reverse mortgages.

3. Various Title Company Expenses – 1/3 of total cost
These costs include the title policy, appraisal, survey, document preparation charges, attorney fees, and compensation to the Title Company.

NOTE: All fees on a reverse mortgage are regulated and capped by the U.S. Government. Despite that, they typically run $5,000 – $8,000 and are added to your loan balance. In evaluating these fees, here’s the key thing to consider – how long do you anticipate staying in your home? If it’s long term and you can spread those fees over a number of years, the cost will likely be $500-$800 a year. Not bad at all. But alternatively if you anticipate moving in the short term, getting a reverse mortgage may not be right for you. The reason is because if you can only spread those fees over a couple of years, it makes the reverse mortgage too expensive.

Loan Repayment

The loan is not due and payable until the borrower no longer occupies the home as a principal residence.(i.e., the last surviving borrower sells, moves out permanently, or passes away.)

Interest Rates

Today the most common interest rates for a reverse mortgage is a fixed interest rate between 5-6%. Once the loan is closed your interest rate will never change as long as you live in the home.

There are variable rates available that begin much lower but will adjust upward if market interest rates begin to climb. Variable rates will be capped at 10% above the beginning rate when the loan is closed. For example, if you close at a variable rate of 2.5% then your loan rate will be capped at 12.5% should interest rates ever climb that high.