Reverse mortgage origination Print E-mail
Reverse mortgage origination fees are the fees which are charged by the lenders to give loan to borrowers. This is charged upfront but the payment does not need to be made, instead it is capitalized into the loan. Reverse mortgage origination fees can be quite huge. The FHA approved reverse mortgage origination fee is up to a maximum of 2% of the asset appraised value or 2% of the FHA approved loan limit in that locality, which ever comes less. Thus we can see that the origination fee is based on the loan size, the higher the loan amount, the higher will be the origination fees. For normal mortgages, these rates are usually 1% of the loan amount. Thus we can see that the reverse mortgage origination fees are very steep compared to normal mortgage origination costs. Thus, you should have the lenders put down the costs in writing upfront well before you accept the reverse mortgage as it might turn out to be much higher than you expected. A bad thing about reverse mortgage origination fees is the fact that it is capitalized as part of the loan. That means that not only do you pay the fee costs, an interest also gets accrued for this cost and this has a compounded effect which hugely increases the burden for the borrower. The worst part is that reverse mortgage origination costs are not the only costs that are incurred. There are the government mortgage insurance costs, which is usually 2% of the loan amount, costs due to employing third party vendors to do property appraisals, closing fees and other service fees as may be charged by the lenders. In all, it is a very expensive proposition as the fees itself can come to tens of thousands of dollars. Add to this the compounding effect of this amount which is made part of the loan and you end up paying a booty for these costs. No wonder that these extremely high costs deter a lot of senior citizens from opting for reverse mortgages. However there are certain lenders who have come up with schemes where there are zero reverse mortgage origination costs. These schemes are usually for loans of large amount, exceeding $200,000. For even higher amounts, the third party fees are also waived off. How this is made possible? Well, they property to loan value ratio is lower in these cases, thus you are getting a loan amount which is lesser than you would otherwise have got. So if high reverse mortgage origination and other fees were deterring you from taking a reverse mortgage, now you have an option where you can choose to eliminate the costs if you are taking loans exceeding $200,000.


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