When you creep up into your later years, you’re probably thinking more about the best ways to spend retirement. Maybe you’ve been saving up for a lifetime and are ready to cash out for that luxury home upgrade or new boat to take out on the lake. Although getting older may feel like a burden, there are many ways you can benefit as a senior.
If you’re a homeowner over the age of 62, you are likely eligible for a reverse mortgage. This kind of loan allows homeowners to take advantage of their home’s equity to make the most out of retirement. Throughout this month, True Concept Title is exploring the reverse mortgage process and its benefits.
In today’s post, we dive into what costs to expect when applying for a reverse mortgage. These include:
- Upfront MIP
- Origination Fee
- Title Insurance
- Additional Fees
Let’s get into the details!
What is a Reverse Mortgage?
A reverse mortgage is a type of loan where instead of the borrower paying the bank each month like for a normal mortgage, the bank pays the borrower based on the home’s equity. When the home is sold or the owner passes on, the bank is paid back any due principal and interest.
A reverse mortgage can be a great way for older homeowners to utilize the increased value of their home as it has increased over the years. However, as with any closing process, there are important costs to keep in mind. A reverse mortgage isn’t “free.”
The Upfront MIP, or mortgage insurance premium, is the most expensive fee when closing on a reverse mortgage. This fee covers any risks on the lender’s end regarding the transaction. Typically, this fee is 2 percent of the appraised home value. This may seem like a small percentage, but it can become a big number quickly.
This fee is required by federal law, so if you plan to get a reverse mortgage, make sure you set the appropriate amount aside!
This second fee is for the lender to complete the transaction. HUD, which is the federal organization that regulates reverse mortgages, limits this fee to $6000, but it is still based on the value of the home similar to the Upfront MIP.
The fee is typically 2 percent of the first $200,000 of the home’s cost plus an additional 1 percent of the second $200,000.
In any kind of closing on a mortgage, title insurance is a necessary part of the transaction. The cost of this fee will depend on the state and county in which the transaction is being completed. This price will also vary depending on the company you choose to work with.
At True Concept Title, our reasonable prices are hard to beat, but our exceptional services are even more challenging to beat! To ensure you have coverage for both yourself and the lender, contact our title experts today – (813) 263-7168.
Any mortgage transaction requires an appraisal to determine the appropriate value of your home. This will cost between $350 and $550.
Other Small Fees
While the previously mentioned fees are the main chunk of change associated with a reverse mortgage, there are several other smaller fees that vary depending on where you live. Before being approved for a reverse mortgage, the borrower must receive HUD counseling, which will cost a certain fee or may even be free depending on where you live.
Other fees include, but are not limited to:
- Credit report fee
- FEMA flood certification
- Recording fee
- Notary & documentation preparation fees
- Settlement or escrow fee
- Property inspection fee
- Payoff calculation fee
- Courier fee
- Wiring fee
When purchasing a reverse mortgage or any kind of mortgage, our team at True Concept Title suggests getting quotes from multiple lenders to compare costs with different companies.
Retire Easy with True Concept Title
After decades of hard work and determination, you’ve earned a well-deserved break. What better way to relax than by enjoying the fruits of your labor through a reverse mortgage?
If you’re a homeowner over the age of 62, you should take advantage of the equity your home has accrued. Our team of reliable and knowledgeable experts at True Concept Title will help make the process sweet and simple. Enjoy an easy retirement by contacting our pros today – (813) 263-7168.