subject: Is The Reverse Mortage Loan More Expensive [print this page] Is The Reverse Mortage Loan More Expensive
The reverse mortgage loan has had this image burden for a long time. However, the people, who repeat this argument cannot offer another product, which would offer the same benefits with the lower costs to the seniors.
The reverse mortgage loan has costs, but also great benefits. A healthy thing is to compare the costs with the benefits, which the product gives. If a senior would have to sell his home and to move to the cheaper area and flat to get the needed money for the increased medical bills, is the reverse mortgage loan expensive?
1. The HECM Reverse Mortgage Loan.
This is the most popular loan type and insured by FHA, The Federal Housing Administration. It offers more choices and security to the senior borrowers. For instance they guarantee, that you will get your monthly payments as long as you live in your home. Even if you live longer than your life expectancy and the loan costs are already bigger than the home value, you will get the monthly payments.
2. Another Protection: You Cannot Owe More Than The Home Value.
If it happens, that the home selling price is smaller than the total amount of the loan costs, a borrower, or the heirs, will not owe more than the home value. Thanks to the mortgage insurance, which is compulsory, the borrower is always protected. The cash money really comes from the equity of the home or from the insurance.
3. If A Lender Becomes Bankrupt.
Usually, if a bank becomes bankrupt, the customers will suffer. But the FHA insured reverse mortgage loan offers protection also in these circumstances. If a lender becomes bankrupt, the mortgage insurance guarantees, that the borrower will continue to get his monthly payments. The FHA insurance premium is 2% to the loan amount.
4. Other Fees.
There is a monthly loan service fee, which is $ 35 and is paid when the loan will be closed. The loan origination fee is charged to originate, process and close the loan application. This fee is 2 % to the appraised home value or the FHA maximum loan limit, whichever is less. The origination fee cannot be less than $ 2.000. The fees in this point plus the obligatory mortgage insurance are the biggest fees a borrower has to pay.
5. The Other Items.
There are also several other fees, which can be familiar to you from the usual mortgages, like the document preparation, appraisal, pest inspection, credit report, flood certification, title insurance,courier, recording, closing or escrow fee, survey.
