Reverse Mortgage Costs: Non-Interest Fees
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When you apply for a reverse mortgage loan, or any other home loan for that matter, it is a matter of expectation that there will be interest attached to the loan and ultimately that the repayments are going to cover the principal plus the interest. Something else that is a given is that there are going to be some fees involved. The differences lie in where the fees actually occur. When you are talking about a mortgage or a home equity loan, fees tend to be punishments for transgressions against the contract such as underpayment, non-payment or late payment of the monthly amount agreed upon. Since there are no monthly payments with reverse mortgage loans, these fees do not apply. However, there are still some other fees that reverse mortgage lenders charge and part of understanding a reverse mortgage lies in understanding what these fees are.

Application Fee

This is a fee charged by the reverse mortgage lender to the person applying for the reverse mortgage in order to cover their costs when it comes to assessing not only the suitability of the client for a reverse mortgage, but also the amount of money that they can get. The two main expenses in this area are the money paid by the lender to a credit bureau for a copy of your credit report (even though credit reports do not factor into the final assessment, they are still often requested by reverse mortgage lenders) as well as the cost for an appraisal of your property.

Origination Fee

Origination fees are fees that are paid to the reverse mortgage lender by the client for the service that is being provided to them. They are similar to an up-front service charge that you might see from another loan and customarily are usually equivalent to around 2% of the principal amount. In addition to that, there is also usually a minimum threshold that the 2% must reach, which in most cases is around $2,500.00. This means that even if 2% of your principal is less than the threshold amount, you would still have to pay the threshold amount.

Closing Costs

Closing costs are basically charged by the reverse mortgage lender in order to cover the costs of closing the accounts. Accounts are closed when the loan is repaid or when some sort of resolution is reached, which makes the closing cost conceptually equivalent to an administrative fee for closing your loan account.

Insurance

Insurance is now a mandatory cost on most of the loans in the marketplace, including almost all reverse mortgage loans. Reverse mortgage insurance rates are determined by the different reverse mortgage lenders and can be found on their respective websites.

Monthly Service Charge

Depending on the specific reverse mortgage loan that you are interested in obtaining, there might be a monthly fee for servicing the debt that the reverse mortgage will create. This monthly charge is usually not particularly large, but it is definitely something to keep in mind when considering all of the costs inherent to a reverse mortgage.

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