Reverse Mortgages 101

The costs of a Reverse Mortgage are not obvious because you do not pay most of them out-of-pocket when you take out a Reverse Mortgage. As a general matter, the cost of appraisal is the only cost that may need to be paid when the Reverse Mortgage is taken. Remaining costs are usually added to the amount of the debt. 

Costs include:

• Closing costs: The same kind of closing costs you encounter when you purchased your home, such as:
  • Appraisal fees (to determine current market value of the home)
  • Title fees (to prove you own title to the house)
  • Credit report fees (to verify your credit, including whether there are liens or judgments against you)
  • Flood certification fees  (to detrmine whether the property is in a designated flood plane)
  • Legal fees (including the cost of preparing documents)
  • Recording fees (for recording the mortgage)
  • Similar expenses
• "Points" also known as "Origination fees" (fees for creating the loan) which can be up to 2% of the loan amount for the initial $200,000 borrowed and 1% of the balance.
• The cost of repairs to your home that the lender might require.
• Interest.
• The mortgage insurance premium which is a percentage of the value of the home.

NOTE: As with any other loan or mortgage, be sure to take all the costs into consideration when comparing offers.

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