I have created a video that goes into detail on why reverse mortgage fees seem to be so high. I will define each reverse mortgage fee.
All reverse mortgages are not the same and there is now a low-fee reverse mortgage option now available for people over the age of 55. I have another video on my YouTube channel that explains the different types of reverse mortgages.
The HECM Reverse Mortgage, inherently has higher loan fees to obtain the loan and some people think that these fees are a punitive fee only for the reverse mortgage.
Many people do not know that the HECM Reverse Mortgage, the one we see advertised on TV is in the family of FHA loans. I will explain in the video why this is an important fact, but I will summarize below.
Every FHA loan that is offered, either the 3.5% down payment first time home buyer’s loan, the 203k buy and rehab home loan, Energy Efficient Home Loan or HECM Reverse Mortgage requires MIP which is an insurance policy that protects the lender in the event when the reverse mortgage home loan is paid off, if the loan balance is higher than the value of the home, the insurance policy pays out and covers the gap, it makes the lender whole. FHA loans are inherently riskier than other types of home loans which is why no matter how much equity you have in your home or how large your down payment, you still have to pay MIP. Conventional lenders have PMI insurance and if you have greater than 20% equity in your home or more than a 20% down payment, you don’t need PMI on your loan. So why does FHA require this MIP insurance? Because a few years ago, the HECM Reverse Mortgage MIP fund lost over $2 billion. In 2020, the program only lost $500k. In some parts of the country homes do not appreciate as in other parts of the country and this is a national program so all the FHA loan MIP insurance goes into a shared insurance fund where all claims for properties under water with an FHA loan pay out. MIP is vital in order for the FHA HECM Reverse Mortgage to continue.
The upfront MIP premium that gets rolled into the loan and the subsequent monthly MIP that gets charged is different for each type of FHA loan, the premiums vary. FHA has made adjustments to the upfront MIP (which starts the policy) and monthly MIP premiums on the reverse mortgage 5 times over the past 13 years, which means reverse mortgages may have different MIP premium structures than other reverse mortgages depending on what year the loan funded. Again, the MIP is only charged on FHA HECM Reverse Mortgages. Non-FHA Reverse Mortgages do not have this insurance charge, but in exchange the interest rate is higher on the loan.
So which loan is better and what are the fees on the non-FHA Reverse Mortgage? Click here to watch the video it goes into more detail.
If you have any questions or concerns on how Reverse Mortgage fees are charged and how they differ from loan to loan, feel free to fill out the contact form below, or go to my website and click on the “Tell Me Your Scenario” button in the center of my home page or top right, there is another button there. You can also text, email or call me, I can also make a video specific for your situation.
Thanks for your time, and I look forward to serving you.
Kind regards,
KW