Personal-finance blog NerdWallet presented a straightforward, unbiased look at reverse mortgage fees this week, with the help of two industry heavyweights.
Paul Fiore, executive vice president of retail lending at American Advisors Group, and Dan Hultquist, author and director of education at ReverseVision, teamed up to lay out all the fees that potential Home Equity Conversion Mortgage borrowers should consider before initiating the process, from counseling to the Mortgage Insurance Premium.
NerdWallet writer Deborah Kearns splits the expenses into two categories, upfront and ongoing, with a naturally longer list of one-time fees. She quotes an average counseling fee of $125 and appraisal fees of $300 to $500 — depending on the size of the home — and then walks readers through the MIP and origination-fee structure.
“Expect to pay either $2,500 or 2% of the first $200,000 of your home’s appraised value (whichever is greater),” the article advises, noting that borrowers also typically pay 1% of the amount over $200,000.
The article additionally tells potential borrowers to request a full list of all third-party closing costs, such as credit checks and title insurance, and reminds readers that they can choose their own title company regardless of which firm the lender recommends.
Continuing into ongoing fees, Kearns dutifully covers the annual MIP, the $30 to $35 servicing fee depending on the type of loan, and long-term costs associated with maintaining the property and staying current on property taxes. While not referring to it by name, the piece refers to Financial Assessment guidelines that require borrowers to prove they can cover these key ongoing costs during the life of the loan
In all, despite raising the specter of “higher costs” and steeper interest rates compared to those associated with home equity loans and forward mortgages, Nerdwallet provides a quick, all-in-one resource for those who might be curious about getting a reverse mortgage but scared of the fees — a common barrier to potential HECM borrowers.
Read the full piece here.
Written by Alex Spanko