Fees, Costs, and Payments During the Life of a Reverse Mortgage
Loan fees are standard for reverse mortgages, as with any mortgage product. While a somewhat unique financial product, a reverse mortgage is still a loan that has a lender, borrower, repayment terms, and fees. Borrowers can anticipate paying several reverse mortgage costs and fees, including: an appraisal fee, repair fees, up-front mortgage insurance premiums, an origination fee, and certain closing costs. Many of these reverse mortgage fees can either be financed by the borrower directly or paid using funds from the reverse home mortgage. This makes reverse mortgages very affordable, leaving very little out-of-pocket expense for the borrower.
While a reverse mortgage “appreciates,” however, there are also a few, limited additional reverse mortgage costs that the lender can either charge you, or that naturally incur due to the requirements of the loan. Borrowers may be able these directly or add some reverse mortgage fees to their loan balance.
The only reverse mortgage fees, costs and payments that a reverse mortgage lender may charge during the loan are:
• The cost to maintain the structural integrity of the property.
• The cost of any appraisal used for refinancing or extending the loan.
• The cost of property taxes and real estate insurance.
• A monthly servicing fee with a cap of $30.00.
• Interest on the loan monies
• The cost of additional mortgage insurance (which is under the discretion of the borrower and is NOT required).
At the End of the Loan
At the end of the reverse mortgage loan, there may be additional fees, costs, or payments. The lender may charge a termination or maturity fee. This fee could be the actual cost of arranging the sale of the property in order to remove the lien. Costs may include broker’s fees, advertising costs, moving and/or storage costs and legal and other fees incurred by the lender. There may or may not be a flat percentage fee.
Equity Participation / Shared Appreciation
The lender and borrower may agree to “shared appreciation” or “equity participation” in exchange for a lower interest rate. Participation mortgages got their name because the lender “participates,” or has the right, to a share in any increase in the value of the borrower’s home.
A Shared Appreciation Mortgage (SAM) is based on the appreciation in value of the property during the time between loan origination and loan termination. The lender receives a percentage of the appreciated value of the property, which is agreed-on at the onset of the loan, when the loan is terminated.