If you are approaching your golden years and seeking a bit of financial flexibility, you might want to look at a reverse mortgage. This unique financial product is only open to individuals over 62 years of age. It allows you to convert some of your home’s equity into cash which you can use as needed in your retirement.

Of course, a reverse mortgage isn’t without its costs. Let’s explore the fees that you will encounter when you take out a reverse mortgage loan.

Upfront And Pre-Closing Costs

The first step in getting a reverse mortgage (also known as a Home Equity Conversion Mortgage or “HECM”) is to visit with a third-party HECM advisor. These advisors are approved by the Department of Housing and Urban Development. It is their job to ensure that you know the ins and outs of getting a reverse mortgage. Expect to pay from $100 to $200 for this session.

Another cost you’ll incur is a home appraisal. Every reverse mortgage lender will require that your home’s value assessed by an independent appraiser. This cost varies from $200 to $500 and up depending on the size of your home, its current condition, its age and a variety of other factors.

Like a traditional mortgage, your lender is likely to assess an origination fee. This fee covers the cost of processing and closing your reverse mortgage loan. Most lenders charge a small percentage of the total amount of your loan. For example, if you are borrowing $100,000 you may pay around one or two percent, which comes to $1,000 or $2,000. Regardless of the total amount, the origination fee is capped at $6,000 total.

Post-Closing And Ongoing Costs

After your reverse mortgage has closed, you may find that there are some additional ongoing costs that you will need to be aware of. For example, some lenders charge a loan servicing fee. This fee is usually paid each month and tends to vary depending on the interest rate of your reverse mortgage.

Finally, you’ll be responsible for paying the ongoing cost of mortgage insurance. This is assessed as an annual premium and equals around 1.25 percent of the balance owing. As this can end up being a significant cost, it is one you’ll want to budget for.

As with any loan, a reverse mortgage has its costs. However, the financial flexibility you gain with a reverse mortgage is certainly worth it. When you’re ready to explore your reverse mortgage options, contact our friendly team of mortgage professionals. We’re happy to help.

There are many mortgage products on the market that work for all different kinds of homebuyers, but many people have not heard about reverse mortgages and how they can benefit their situation. If you’re curious about this type of mortgage and want to know more, here are some questions that will get you on the road to understanding the ins-and-outs of this product.

What’s A Reverse Mortgage?

The reverse mortgage was created in the wake of the 2008 recession and is commonly known as HECM, the Home Equity Conversion Mortgage for Purchase. While this mortgage option is beneficial for those who want to use the equity in their home and defer their monthly payments, it’s not a good choice for those who are planning to move in the short-term future.

Who Can Qualify?

Since a reverse mortgage allows the homeowner to tap into the equity that they’ve already accumulated in their home, they need to have a high amount of their mortgage paid off. They must also be 62 years of age or older in order to qualify. In addition, they should have a solid financial history so lenders will be assured they have the ability to pay insurance and property taxes.

What’s Required To Apply?

Like all mortgage products, a reverse mortgage is a type of loan so you’ll need to apply for it. In order to do this, you’ll need proper identification, address verification and proof that you’ve met with a professional to ensure this is the right choice for you. In addition, you’ll need to prove that you can make the monthly insurance and property tax payments and you’ll have to provide financial documentation to ensure that you’re a good credit risk.

Should I Choose A Reverse Mortgage?

A reverse mortgage can be beneficial if you want to forego monthly payments, but it’s worth knowing that this mortgage will be payable in the event that you decide to sell the home or pass away. It’s also important to be aware that interest can accrue on the home since you’ll be deferring monthly payments. While this may work for you, it’s important to talk with a mortgage professional before making a final decision.

A reverse mortgage can be an option for those older than 62, but it’s important to be aware of what it entails and what it can do for you before choosing this product. If you’re currently considering your mortgage options, contact your trusted mortgage professionals for more information.