What are the costs in obtaining HECM reverse mortgage?
Most borrowers choose to pay for the costs associated with obtaining a HECM reverse mortgage by financing them into the loan and having them paid from the proceeds of the loan.
- Mortgage Insurance Premium
You will incur a cost for FHA mortgage insurance. The mortgage insurance guarantees that you will receive expected loan advances and that the lender will be insured against loss on the loan.You will be charged an initial upfront mortgage insurance premium (MIP) at closing. The initial MIP will be 2.0 percent of the home’s appraised value or FHA lending limit ($726,525), whichever number is less. You also are charged MIP on an annual basis — 0.5 percent of the outstanding loan balance — however this fee doesn’t come out of your available loan proceeds. Rather, it accrues over time and you pay it once the loan is called due and payable. You can finance the upfront mortgage insurance premium (MIP) as part of your loan.
- Third Party Charges
Closing costs from third parties can include an appraisal, title search and insurance, surveys, inspections, recording fees, mortgage taxes, credit checks and other fees.
- Origination Fee
You will pay an origination fee to compensate the lender for processing your HECM loan. A lender can charge the greater of $2,500 or 2% of the first $200,000 of your home’s value plus 1% of the amount over $200,000. HECM origination fees are capped at $6,000.
- Servicing Fee
Lenders or their agents provide servicing throughout the life of the HECM. Servicing includes sending you account statements, disbursing loan proceeds and making certain that you keep up with loan requirements such as paying real estate taxes and hazard insurance premium. Lenders may charge a monthly servicing fee of no more than $35. At loan origination, the lender may set aside the servicing fee and deduct the fee from your available funds. Each month the monthly servicing fee is added to your loan balance. Lenders may also choose to include the servicing fee in the mortgage interest rate.
First Nations has been helping South Carolina seniors with reverse mortgages since 2002. Call us today to learn if a Reverse Mortgage is right for you.