If you have been looking into getting a reverse mortgage, then undoubtedly you have heard that one of the negatives repeatedly cited is that the costs are high. On the surface this seems to be a true statement. However, if you start dissecting the costs of a reverse mortgage and compare those costs to alternatives like selling your home and moving, you may find that the costs are only high if you have other assets or sources of income to access other than your home. If you truly need a reverse mortgage in order to make ends meet or for other financial reasons, then you may realize that the costs are not too high given your particular circumstances.

Let's take a closer look at what the real costs of a reverse mortgage are and what these costs pay for.

The majority of reverse mortgage loans that have closed in the United States to date, have been the FHA insured HECM (Home Equity Conversion Mortgage.) Because these loans are insured by FHA and backed by HUD they are considered to be the safest reverse mortgage loans available and usually offer the most benefits and more choices of how you can elect to receive your loan proceeds. The guarantees that you receive with the FHA insured HECM reverse mortgage loan are:

1. Under the tenure option you will continue to receive your monthly payments from your reverse mortgage as long as you live in your home. That means that even if you outlive your life expectancy and your house is not worth as much as your reverse mortgage has paid you, you will continue to receive those payments, until you permanently leave your home. Guaranteed!

2. Your heirs or your estate will NEVER owe more on the loan than the value of your home at the time the loan is repaid. Reverse Mortgage loans are non-recourse loans. The lender can never come back to your estate or your heirs if there is a shortfall at the time of repayment. 3. Additionally, if the lender should happen to go out of business, the FHA insurance guarantees that you will continue to receive your monthly payments or have access to your credit line in accordance with the terms of your original loan agreement.

If the FHA mortgage insurance was not available, you can be sure that there would be very few lenders willing to make reverse mortgage loans with the favorable terms that are offered to seniors today.

The cost of the FHA insurance premium is 2% of the loan amount. The insurance premium along with other closing costs are rolled into the loan. They are not upfront out of pocket expenses, they are simply paid by you or your estate at the time the loan is repaid.

Loan Servicing Fee:

A monthly loan servicing fee of up to $35.00 per month is charged to the borrower as part of the overall closing costs. All lenders charge a loan servicing fee. However, on a forward mortgage the loan servicing fee is incorporated into the interest rate on the loan, so the borrower often times isn't even aware of it.

Page 1 of 2 :: First | Last :: Prev | 1 2 | Next