Discover the basis for up front fees on reverse mortgages. Find out how to pay cost during closing without out-of-pocket expense to save more money.
Non-recourse lenders rely on collateral value rather than credit ratings for approval. The up front fees on reverse mortgages reflect the importance of collateral value with little or no regard for past payment histories, credit scores, or the ability to make regular monthly payments. In relative terms, costs may be high compared to general unsecured loans but remain necessary because of these unique features.
The Fees on Reverse Mortgages Represent Collateral Importance
Lenders that specialize in non-recourse loans have special concerns. Because borrowers do not technically accept personal liability, the value of collateral, standing alone, must justify credit approval. The up front fees on reverse mortgages represent the time, care and evaluation process necessary to value residential property accurately.
The up front fees on reverse mortgages include the cost of physically inspecting home, conducting an appraisal, and verifying clean title. Physical inspection is necessary to verify the current condition of homes and evaluate how homeowners may care for a home in the future. Once receiving approval, borrowers no longer make regular monthly payments. In addition, borrowers may pay up front fees on reverse mortgages using loan proceeds.
How to Pay Up Front Fees on Reverse Mortgages
In most situations, future draws against a line of credit do not have restrictions on use. Borrowers may draw against funds after approval and completing the closing process. The first draws may also occur during the closing to pay up front fees on reverse mortgages.
Borrowers may pay loan costs by any means. Loan proceeds are but one way to pay costs. In addition, borrowers may pay costs in advance. Because of the flexibility designed into future draws, many non-recourse loans allow borrowers to draw as much or as little credit required.
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