Costs Of Reverse Home Mortgage – Is It Worth The Money

Costs Of Reverse Home Mortgage Is It Worth The Money

The idea of the reverse home mortgage is to give some extra cash to a senior against the equity of his home. These seniors are in financial situations, where they have no other alternative to get more disposable money. They are called cash poor but equity rich.

The reverse home mortgage releases money from the equity of the home and turns it into cash. The seniors use the money, which they have paid during the many years, when they were still working. The income is usually tax free, especially if it is used during the same month as received. It is wise to check, that the incomes do not endanger the eligibility to the Medicare nor to the other social security programs.

1. How To Pay The Costs?

As said before the reverse home mortgage has no monthly payments. The loan capital, the interests and all the costs will be paid back, when the loan will be closed. This means, that all fees, which are listed below, will be added to the loan sum. If a senior has still a normal mortgage left, he has to pay it away with the reverse loan, because he can have only one mortgage type at a time. This will give him more monthly money.

2. The Mortgage Insurance And The Origination Fee.

The mortgage insurance is obligatory and guarantees, that the borrower can pay away the loan at closing. It is 2 % to the appraised home value. The origination fee cap is 2 % to the first 200.000 of the loan and thereafter 1 % with an overall cap of $ 6.000.

3. The Variable Or Fixed Interest?

When a borrower decides about the reverse loan, he has to decide, whether he will take a variable or fixed interest rate. If the interest rates are generally down and the forecast is, that they will stay there, it is wise to try to get a long term loan with a fixed rate. It makes the schedule more predictable.

4. Other Items.

The real estate appraisal is $ 300 - $ 500 and survey $ 300 - $ 500. Additionally there are the title, attorney and county recording fees plus the title insurance.

5. Public Sector Loans.

Some states and local governments have the low cost reverse mortgage programs, which they offer to the seniors. These loans must be used for certain purposes only, such as paying for home repairs or property taxes. They can have lower interest rates and some come even without any fees. They can include the restrictions as to the qualifications and locations.

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