Saturday, September 25, 2010

A Quick Look On Fha Reverse Mortgage And Its Costs

Understanding the costs of FHA reverse mortgage is not difficult. But you need to know that the costs can vary form one lender to another. So you should look for the best offers from different lenders.

Cost of FHA Mortgage Insurance Premium

If you take out a reverse mortgage loan, you have no obligation to repay it as long as you live in the mortgaged home. In case you will transfer residence, the lender, your heir, or you can sell the property without leaving any debt. This is possible because the insurance ensures that you will never owe more than the value of your home.

The lender is also protected by the insurance. If the loan principal and interest is greater than the sale value, the insurance will cover the difference. The mortgage insurance can also ensure that you will get the cash advances during the servicing of the loan.

The FHA is responsible for collecting the insurance premium from you. You will have to pay a one time insurance rate of 2 percent of the maximum amount borrowed. This can be paid at closing. You also have to pay 0.5 percent annual or monthly insurance charge.

Fees for Mortgage and Interest Rates

The interest rate could vary during the entire term of the loan. As long as the mortgage lasts, the interest rate will be applied. Some lenders may combine the interest rate and the associated fees. If this is your case, you should ask the lender about the included interest rate. You must also inquire if the combination will have an effect on future debts.

You can also choose between fixed interest rate and variable interest rate. But before you make a choice, it is important to understand the implications of higher interest rate if it will be applied on your debt at a later date.

You have to understand that variable interest rates can be adjusted monthly or annually. Most lenders allow a maximum of 2 percentage points annually for the adjustment on the mortgage interest rate. Do take note though that the allowance must not exceed 5 percentage points over the lifetime of the mortgage loan.

Other Costs Involved in Reverse Mortgage

Like conventional mortgages, a lender can charge an origination fee for reverse mortgage. This will include expenses for documentations. To illustrate the cost, a home worth $250,000 will have an origination fee of up to $4,500. The fee could increase depending on the value of the home.

You must also pay the closing costs which include title search, insurance, surveys, inspection, appraisals, taxes, and recording fees. The charges could range between $2,000 and $3,000. The closing costs however vary from state to state. Aside from the closing costs, you are also required to pay the servicing fee. The standard servicing fee is usually $35 per month.

Usually, the costs of reverse mortgage are included in the loan balance. The proceeds of the mortgage can pay for it. It is important to determine the costs of reverse mortgage so you can understand if it is a good option for you.
Rob K. Blake, mortgage expert and author, educates mortgage shoppers on finding local providers by state like Louisiana Mortgage Brokers and Lenders and provides reviews of national companies like Bank of America Mortgage.


  1. Reverse mortgage's are very helpful for some people :-P

  2. dont have to worry about mortgage for a while :)

  3. Don't have to worry about mortgage for now, but this is a really usefull read!

  4. ufff
    rather buy cars and trade them in for house. =D

    smoochies n' poopies! :*

  5. what people need to understand when borrowing any money is to always pay more than the minimum payment! you can dramatically reduce interest this way!