A reverse mortgage is a type of loan that allows you to convert some equity in your home into cash. When you take out a reverse mortgage, you do not have to sell your home or add monthly expenses. However, reverse mortgages are not the right choice for everyone. Since a reverse mortgage eats up some of the equity in your home, it reduces your assets.
In some cases, a reverse mortgage may be a good decision. Before considering a reverse mortgage, it is important to understand the cost associated with it.
Upfront Fees Associated with a Reverse Mortgage
Reverse mortgages come with several costs and fees upfront. The fees associated with this type of mortgage include:
- Origination fees: A one-time fee you pay to your lender for the loan. The origination fee will include some percentage of the home value or some amount out of the first $200,000 of your home’s value, and some % for the remaining value. Sometimes this fee is capped at $6,000.
- Appraisal fee: You must have your property appraised to obtain a reverse mortgage. Appraisals typically cost under $1000 and will have an additional follow-up fee if you had to make repairs.
- Repair costs: If the appraisal finds structural issues that violate compliance, then you will need to pay for those repairs.
- Mortgage insurance: You must purchase mortgage insurance for your reverse mortgage.
Additionally, you must pay closing costs. Closing costs vary based on your location and the worth of your home, but they can be extensive. Potential closing costs may include:
- Flood certification
- Title insurance
- Pest inspection
- Survey fee
- Document prep fee
- Credit report free
- County recorder’s fee
Recurring Charges on Your Loan
There are monthly recurring charges for your reverse loan as well. The monthly/annual expenses include:
- Mortgage insurance premium
- Property taxes
- Homeowners insurance
- Flood insurance
Reverse mortgages have compounding interest that you pay at the end of your loan. Just like with other loans, you can choose an adjustable-rate or fixed-rate for your interest.
How much will my reverse loan cost?
As you can see, reverse mortgages have a number of costs associated with them. However, the actual price is difficult to determine, as it will depend on your specific property and its value.
Affiliated Mortgage as the best provider of home loans in Rapid City, SD, top amongst mortgage lenders in Sioux Falls and mortgage companies in Fargo. For more information on reverse mortgages and their costs, our team is happy to help. Contact us today for more information.
* Disclosure: The numbers are only estimates and are subject to change with each state and mortgage company.
© 2020 Affiliated Mortgage, LLC. NMLS #14211: AZ NMLS#0947858. All Rights Reserved. Affiliated Mortgage, LLC is a Division of Lend Smart Mortgage NMLS #4474
Developed and designed by https://blairallenagency.com