If you need equity from your home and have already decided that you should take out a reverse mortgage, you may be curious about the interest rates and fees associated with a reverse mortgage loan. As with any financial tool, it’s important to have a clear understanding of all associated costs, including closing costs, lending fees and applicable interest rates before moving forward. Please note: the reverse mortgage rates and fees will vary depending upon the services your lender provides and the type of payouts you select, among other factors. For more detailed information about the specific reverse mortgage interest rates and fees you’ll be facing, contact a HomeBridge Mortgage Loan Originator today.
If you’re thinking about taking out a reverse mortgage it means you’ve experienced the mortgage loan process at least once before. Remember how you had to pay a mortgage insurance premium (MIP) at closing, and had to pay it for the life of the loan? Reverse mortgages are no different. Here’s how the MIP charge is calculated for reverse mortgages: the reverse mortgage lender will evaluate the appraised value of your home and the HECM loan limit and select the lesser of the two. Whatever the lesser value is, you’ll need to pay either .5 percent or 2.5% of the value as part of the closing costs. This number is determined by the percent of loan value. HECM loan limits and rates are subject to change, so check with your Mortgage Loan Originator for current rates.
Origination fees, or a fee charged by a reverse mortgage lender is charged when entering a loan agreement, to cover the cost of processing the loan. Origination fees are strictly regulated by HUD, and insured by the FHA. This means there is a strict government-mandated cap on origination fees and percentages.
For a general idea of how much your origination fees will be, here are some guidelines:
- If your home is valued at $125,000 or less, the origination fee is capped at $2,500.
- If your home is worth more than $125,000, the lender is allowed to charge 2 percent on the first $200,000 and 1 percent on the value of the home above $200,000, for a maximum of $6,000.
Structuring a reverse mortgage to meet your financial goals is what a reverse loan specialist does, so make sure you discuss your goals and what you would like to accomplish with a reverse mortgage.
Reverse Mortgage Interest Rates
When it comes to reverse mortgage interest rates, there are a few things you should know. Your interest rates will depend on whether your loan is fixed or adjustable. Since fixed rate reverse mortgages eliminate the risk that the interest rate will increase, they’re an extremely popular choice among borrowers, but in some cases limit the amount of proceeds you can receive. The choice between a fixed or variable rate is determined by what you are trying to accomplish with your reverse mortgage. Your reverse loan specialist should provide you with at least three different options, with different interest rate programs, to assist you in your decision making process.
If you determine that a reverse mortgage loan is the right option, one way to financially prepare for it is to keep the above fees and interest rate information in mind. Some reverse mortgage fees are put in place to protect you, and others are federally capped or regulated to provide you with an additional layer of security. In most cases, the closing costs can be rolled directly into the loan amount.