To receive a reverse mortgage, you’ll have to pay additional fees.
- An initial mortgage insurance cost of 2% of the original loan amount ($2,000 per $100,000) is required.
- Mortgage insurance fees of 0.5 percent of the remaining loan debt ($500 per $100,000) are charged annually.
- Fees for third-party services such as a home appraisal, title search and insurance, surveys, inspections, and other charges
- The origination charge ranges from $2,500 to $6,000, depending on the value of your home.
- A monthly service fee of $30 or $35 is charged.
These costs will be deducted from the lender’s amount you are entitled to borrow. These costs can also be paid in cash up ahead.
When a reverse mortgage may be appropriate for you
- You want to age in place and your home can allow that.
- Your home requires accessibility upgrades so that you can age in place.
- You are unconcerned about leaving your house to your heirs.
- You want or require cash but cannot qualify for a mortgage refinance, home equity loan, or home equity line of credit, possibly due to poor credit.
- You can afford to keep up with homeowners insurance, taxes, and maintenance indefinitely.
When a reverse mortgage may not be suitable for you
- You rely on need-based government assistance such as Medicaid or Supplemental Security Income (SSI), which may be jeopardized if you obtain a reverse mortgage.
- You want someone to inherit your home free and clear of any debt when you pass away.
- You believe you might wish to relocate. (If you want to move while remaining a homeowner, a HECM for Purchase may be a possibility.)
- Because of your health, you may need to stay in an assisted living or nursing facility for more than a year.
- Your spouse will not be a co-borrower on loan. After a borrowing spouse dies, the non-borrowing spouse will not receive any additional reverse mortgage proceeds. In some cases, they may be unable to continue living in the home. (Eligibility is determined at the time of application.)
How to Apply for a Reverse Mortgage
The following are the steps you must take to obtain a reverse mortgage:
- Collect your financial data.
- Apply for at least three reverse mortgages of the same sort.
- Compare prices. The less you pay in interest and fees, the more money you’ll receive.
- Determine which lender to work with and the type of loan you require.
- Attend a reverse mortgage counseling session that has been approved.
- Complete a financial assessment for a reverse mortgage.
- Complete your financing.
