Reverse Mortgage Costs and Fees
In this article Good Day Reverse is going to explain all of the reverse mortgage costs and the reverse mortgage fees involved with the reverse mortgage. We will also explain how we are able to discount the origination fee from the reverse mortgage fees. The reverse mortgage costs and reverse mortgage fees are separated into (3) categories that we have listed below.
Origination Fee – Our Discounted Origination Fee
Other Reverse Mortgage Costs
Initial Mortgage Insurance Premium (IMIP)
If you have any additional questions that are not answered in this article then please do not hesitate to give us a call and speak with one of our reverse mortgage advisors at toll-free 877-676-6542. You can also ask a question in the comment section below and we will promptly answer. In addition, you can request a special offer quote anytime to see our discounted reverse mortgage fees and reverse mortgage rates for yourself!
The Reverse Mortgage Origination Fee And Our Discounts!
Good Day Reverse has included discounts on the reverse mortgage origination fee on all of our reverse mortgage programs.
An origination fee is allowed by HUD to be charged by the lender or broker as part of the reverse mortgage fees. This fee is usually charged by the company to pay for the origination and processing of the reverse mortgage. This reverse mortgage fee is a payment that goes directly to the company originating a reverse mortgage and is paid through the loan at closing. Although the borrower does not pay the origination fee out of pocket, it does decrease the net amount of money that a borrower can receive with the reverse mortgage. When qualifying for a reverse mortgage every reverse mortgage fee that is applied to the loan is less money the borrower can receive as a lump sum, in a line of credit or as a monthly disbursement. This is why discounting the origination fee can be so important. It not only lowers the initial loan balance, but also offers our borrowers more money. Why get less when you can get more with Good Day Reverse!
Why do lenders and brokers charge an origination fee?
There are various reasons why a lender or a broker will charge an origination fee, but the main reason is to pay for the origination and processing of your reverse mortgage loan. There is a considerable amount of time and effort that goes into a company completing a reverse mortgage. Although the origination fee does not pay for tangible costs like appraisal, escrow, or title it does pay for things such as compliance, processors, loan originators and any other overhead fees associated to being a reverse mortgage company. This is why an origination fee is sometimes referenced as a lender fee.
Why does Good Day Reverse discount the origination fee as part of the total reverse mortgage fees?
Now that we have explained the general rules of the reverse mortgage origination fee it is time to explain why Good Day Reverse discounts this reverse mortgage fee. Good Day Reverse believes that every dollar we can save you is an extra dollar in your pocket. This is why we take the origination fee charges so seriously. It is one of our goals to create a loan process that is efficient enough to where we can discount reverse mortgage fees like the origination fee, but still be successful not only for the employee and the borrower, but also as a company. We worked hard and were able to accomplish a situation where we could continue to offer our best available programs while charging a discounted origination fee.
Good Day Reverse is excited to announce that we have updated our origination fee discounts for 2018! At a minimum we discount our origination fee by 25%. In scenarios where a loan balance is $200,000 or more we offer programs where we discount the origination fee by 50% and even waive completely down to $0!
No Reverse Mortgage Loan Processing Fees or Servicing Fees!
Good Day Reverse has waived all loan processing fees and servicing fees. In addition, we are proud to say that your reverse mortgage will be processed in-house and will not be sent to any third party companies. This not only ensures protection of your information, but it also allows us to have more control over your reverse mortgage loan process. This is one reverse mortgage fee that we completely waive, so that you pay $0, to help minimize the total fees.
A servicing fee can be implemented by a lender to pay for the ongoing servicing, or upkeep, of your reverse mortgage. The servicing company of the reverse mortgage is responsible for managing a borrowers available line of credit and issuing monthly disbursement payments. If there is a partial or life expectancy set-aside the servicing company will be responsible for making the homeowners insurance, property tax and any HOA payments on time. In addition, the servicing company will send monthly statements showing the current details and status of the borrowers reverse mortgage. This servicing fee can range from $25-$35 a month. Since this is a fee to be paid for the life of the loan the lender is required to create a “set-aside” at the beginning of the loan. This set-aside can be $3,000+ and will be subtracted from your available money with the reverse mortgage.
Good Day Advantage – Good Day Reverse does not charge ANY servicing fees! We waive them completely on all of our programs down to $0. Not only will you not be charged a penny to service your reverse mortgage for the life of your loan, but we will not need to setup an initial set-aside. This advantage allows our borrowers to pay less and get more from their reverse mortgage.
OTHER COSTS – What are the other reverse mortgage costs?
There are various reverse mortgage costs associated to the origination, processing and underwriting which are referenced as other costs. Good Day Reverse has already explained the details of our discounted reverse mortgage origination fee. In this section we will talk about what makes up the “other reverse mortgage costs” that you will see on a reverse mortgage quote.
Other Reverse Mortgage Costs – Appraisal
Good Day Reverse does not ask for our clients to pay for the appraisal out-of-pocket. Instead we allow our clients to finance the fee, so it can be paid through the loan at closing. Many reverse mortgage lenders will ask borrowers to pay for the appraisal upfront either with a credit card, or by check that is sent in with the application. An assigned FHA approved appraiser completes the appraisal. You can select reverse mortgage appraisal to learn more about the details of the appraisal process.
Other Reverse Mortgage Costs – Title Insurance
Every reverse mortgage requires title insurance to protect the closing of the loan and to protect both the borrowers and the lender in the closing of the reverse mortgage. Title insurance is a reverse mortgage cost that is specified on the initial application and is based on the estimated appraised value. The title insurance cost can change once the appraisal is received if the value is different than the initial estimate. If the cost does change then it will be re-disclosed so that you are aware of the change in closing cost.
Endorsements, are add-ons to the title insurance policy protection. They provide coverage that tailor fits the policy needed based on the uniqueness of the subject properties requirements. These endorsements can include a property being a condominium, manufactured home or a PUD(Planned Urban Development).
Other Reverse Mortgage Costs – Escrow
Just as title insurance is required on every reverse mortgage, so is an escrow service. Escrow holds a few very important jobs that are crucial to the reverse mortgage loan process. First, they will be in charge of receiving all the money once the reverse mortgage funds. Escrow is then responsible to disburse that money appropriately to all parties involved in the transaction. Escrow is also responsible to prepare and record any required documents with the county or state once the reverse mortgage funds. Good Day Reverse uses great escrow services that you can choose to use who have a great knowledge in reverse mortgages and the loan process.
Other Reverse Mortgage Costs – Counseling
Reverse mortgage counseling costs can be listed on the final closing costs. This all depends on if you paid for the counseling session at the time of counseling directly to the counseling agency, or you requested that they finance the cost, so that we pay it through the loan at closing. This option is completely up to you the borrower. A typical charge for reverse mortgage counseling that we see can range anywhere from $125-$225. Good Day Reverse will provide a list of HUD approved counselors in your area as well as nationwide providers.
Other Reverse Mortgage Costs – Closing Notary
A closing notary is assigned once the final reverse mortgage loan documents are ready to be signed by the borrower. In most cases a closing notary will go to the borrowers home with the complete set of reverse mortgage closing documents and assist in the signing with the borrowers. In addition the closing notary is required to verify the borrowers identities by reviewing their identification. Once the signing is complete the notary will execute the documents by notarizing the forms required and send the completed package back to escrow for review.
Other Reverse Mortgage Costs – Recording of Mortgage Documents
There is a cost to record the mortgage and appropriate documents for each county. This cost can vary, because each county charges different fees for this service. Escrow will record the mortgage once the loan funds and the money will be disbursed. Good Day Reverse also works with escrow companies that can assist to correct deeds, which they will record at closing to fix any issue that is found during the loan process. County costs can range from just under $200 to over depending on where the primary residence is located.
Other Reverse Mortgage Costs – Credit Report
Typically, the credit report will be pulled and reviewed early in the loan process before the initial application is completed. Good Day Reverse can easily complete this process once the borrower has approved credit to be pulled. This cost typically ranges from $21-$37 depending on if there are one or two parties that credit is being pulled on.
Other Reverse Mortgage Costs – Flood Certificate
FHA requires a flood certificate be ordered on every reverse mortgage application to determine if the subject property is in a flood zone. If the property is located in a flood zone then we need to show proof that the property has sufficient flood insurance. This closing cost is typically around $10.
Other Reverse Mortgage Costs – Document Preparation
Once the reverse mortgage loan is approved and the file has a clear-to-close then it’s time to prepare the final closing documents. The final document set can typically be over 100 pages and requires escrow and lender approval before being completed. This process can take hours and requires proprietary software to complete.
Other Reverse Mortgage Costs – Property Tax Certification
Reverse mortgages are now required to show the previous 24-month property tax payment history. If your county provides this information on the county website then we can gather the payment information needed for no cost. If the county does not provide this information then we need to use a third party service that can verify with the county the 24-month payment history.
IMIP – The Initial Mortgage Insurance Premium Explained
The word “initial” in the description confirms that this premium is charged at the start of the reverse mortgage loan once it has funded. It is also a premium that is only paid once during the life of the reverse mortgage loan. The Initial Mortgage Insurance Premium is not required to be paid by the borrowers out-of-pocket, but instead added as a closing cost to the starting loan balance.
What is the Cost of the Initial Mortgage Insurance Premium?
The cost of the Initial Mortgage Insurance Premium depends on one key reverse mortgage loan factor. The IMIP charged on all HECM government insured reverse mortgages is 2% of the appraised value, or maximum lending limit of $679,650. In the event that your property appraises for over the maximum lending limit then you will be charged the 2% on just the $679,650.
Example: Your home is appraised for $350,000 and your starting approved principal limit is $180,000. Your current mortgage that we are paying off is $72,000, which is 40% of the principal limit. Your IMIP charge would be 2% of the appraised value of $350,000 which would equal $7,000. If your property appraised for over the lending limit of $679,650 then you would be charged an IMIP of 2% on $679,650 which equals $13,593.
Why Do Reverse Mortgages Need To Be Insured?
There are a number of reasons why reverse mortgages should be and need to be insured. The main reason that there are insurance premiums on the loan is to protect all parties for the life of the loan. In the event that the home is ever worth less than what the current loan balance is both the homeowner and the lender are protected. You can continue to live in your home for as long as you choose and the lender will never make the loan come due as long as you remain current on your property taxes and homeowners insurance. Also, if you have money available in a line of credit you will still be able to access that money. When you obtain a reverse mortgage you are securing that equity, so it is protected by the insurance. These protections are unlike any other mortgage loan currently available.
Do I Still Need Homeowners Insurance?
YES. Even though the reverse mortgage contains both the Initial Mortgage Insurance Premium and the Annual Mortgage Insurance Rate every borrower still needs to keep current their homeowners insurance. Why? The easiest way to put this is that the Initial Mortgage Insurance Premium and Annual Mortgage Insurance Rate protect the reverse mortgage loan and the available money that the borrowers have available to them. A borrowers homeowner’s insurance premium protects the house in case anything were to happen. Two reverse mortgage requirements are that every borrower keeps current on both the homeowners insurance and taxes, so it is imperative that you do not confuse the two. If you have any further questions about differentiating the two please let us know, so we can discuss further.
Have a Good Day!
Disclaimer: Information was also resourced from National Reverse Mortgage Lenders Association which Good Day Reverse is a proud member.