Five primary factors used in determining the Total Annual Lending Cost of a reverse mortgage:
1. Appraised value of property
They take into consideration the actual condition of the house. Some of the questions which need to be addressed include the following: Does it need health or safety repairs? Is the foundation still firm? Can it still withstand natural calamities in the future? Does it have any aesthetic value?
2. The interest rate which is based on the U.S. Treasury 1 year T-Bill.
3. The age of the borrower
The older the borrower is the more amount of loan money he or she will receive. They are also more lenient with the required qualifications when it comes to older individuals because the mortality rate increases and the government wishes to provide these senior citizens the most in life.
4. Type of payment
Will the borrower take it as a line of credit, lump sum or on a monthly payment? These varying modes of payments also influence the amount of loan which the borrower will receive in his reverse mortgage.
5. The value of the property
Lists of reverse mortgage cost and interest rates
One of the major criticisms of reverse mortgage is the expensive cost a borrower has to pay. Below is a list of expenses a borrower has to deal with in reverse mortgage costs.
1. Mortgage insurance fee which is 2% of the appraised value.
2. Origination fee which includes the 2% cap of the first $200,000 and another 1% thereafter. This will constitute an overall cap of $6000.
3. Title Insurance Fee
4. Title, Attorney, and County Recording Fees
5. Real Estate Appraisal which will cost approximately $300-%500.
6. Survey Fee which will also cost an additional $300-$500.
7. Monthly service charge which will cost $25 – $35.
8. Department of Housing and Urban Development (HUD) Counseling Fee
If you will sum up all of these expenses, you will have an estimated cost of $15,000 or more depending on the state where your house is located. This is a big amount considering that the borrower is already a senior citizen, and has no other source of income except for his monthly pension.
Try to reflect on this information before deciding to have a reverse mortgage loan. Make sure you weigh the positive and negative implications of a reverse mortgage loan before signing any reverse mortgage deals with anyone.
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