Loan Costs for Reverse Mortgages

If you are age 62 or older and have built up some equity in your home, a reverse mortgage could be the right financial solution for you. Many homeowners choose reverse mortgages because they provide the financial flexibility to enhance their quality of life during their retirement years.

What Is a Reverse Mortgage?

A reverse mortgage lets you borrow against the equity in your home - you can make use of money you have already invested, without having to make monthly mortgage payments. What's more, because this program is backed by the Federal Housing Administration, you are guaranteed never to owe more than the value of your home when it is sold. And with a reverse mortgage you continue to own your home, as you do today.

Costs of Reverse Mortgages

The primary cost of a reverse mortgage is FHA Mortgage Insurance. This is what allows the FHA to ensure that you and your heirs will not be required to repay a loan balance that is in excess of proceeds from the sale of a home.

Additional fees that are customarily included with the loan amount include:

  • The lender’s origination fee, which is regulated by FHA
  • Fees for services such as appraisal, credit report and flood zone determination
  • Title and settlement costs
  • Local fees and taxes, if applicable

In addition to interest, monthly fees that are added to the loan balance include:

  • Monthly servicing fee (limited to $35)
  • Monthly portion of FHA insurance (.50%/12 of loan balance)