Many people and professionals are under the impression that the costs and fees associated with a reverse loan are very expensive and there is some truth to that belief and because of that belief, will not consider meeting with a qualified loan consultant to get the details.
Because there is more to consider and although initially, the loan is more expensive, over the years it becomes more affordable and could be the ideal solution for a senior who wishes to remain in their home and have some financial stability.
Whether or not the mortgage is a traditional loan or a reverse mortgage, they have similar fees with the exception of the IMIP fee that is charged on all FHA loans, including those where payments are made by the borrowers.
All mortgages have fees such as the following:
- Title Insurance
- Loan Processing
- Credit Report
- Points/Origination Fee
- Recording Fees
- Notary Fee
- Lender “Junk” fees
Reverse loans have some of the same fees with the exception of the following:
- No Processing Fee
- No Lender “Junk fee”
- Attorney review of Living Trust fee for the borrower
- Initial Mortgage Insurance Premium.
All fees on a reverse loan are well regulated by the federal government and that applies to traditional mortgages as well and cannot be changed after the initial disclosure to the loan client unless there has been a “change in circumstances” in reference to the appraisal of the property or the payoff information for an existing mortgage on the subject property.
I will go into this in more detail in my next post and will explain why reverse loans are more expensive in their Closing Costs.
This is due to the initial Mortgage insurance Premium charged by FHA on each loan.