Fees or “costs” for a reverse mortgage are identical to what the fees are for traditional real estate loans, with a couple of exceptions and I’m going to discuss one of those exceptions in this post.
I discussed this topic previously, but I thought that I would go into more detail about the IMIP that is always charged on FHA loans and just what it is, because it is the most expensive but important fee that is charged on all reverse mortgages.
Reverse loans never have a required mortgage payment and there is no loan term to be concerned about, but the interest that is owed each month on it will compound over the life of the loan and one of the important purposes of the Initial Mortgage Insurance Premium / IMIP is to guarantee that no matter how much is owed when the loan becomes due ( the death of the last borrower and or the estate selling the home), they can never owe more than the present value of the property.
In other words, if the loan is larger than what the property is worth, the IMIP will pay the difference, not the borrower or their heirs. They are completely protected and not liable for the repayment of any funds that exceed the current value of the property.
This is referred to as a “Non-Recourse” mortgage.