Reverse Mortgage Closing Costs - Bitter Sweet Indeed
I wish there were such a thing as a perfect mortgage product. People always ask me, "what is the down side to getting a reverse mortgage? It looks too good to be true".
I believe I'm a poor salesman. As such I dive right in and tell my customers straight away, "The closing costs for your reverse mortgage will be higher than you might think".
Reverse mortgages, which are insured by HUD, have high closing costs for multiple reasons... It starts with the lender charging costs based on the home's value. Forward mortgages charge costs on the actual loan amount, which is going to be less than value.
Also, the lender charges a fee for originating the loan called (no surprise) an origination fee. this can be 1% higher than forward mortgages. Finally, FHA's mortgage insurance premium is 2% of valuation, up to $417,000.
You don't need to pull out the calculator to get the basic gist... Costs are not so customer relations friendly.
One could argue the origination fee is not really higher than a typical mortgage, because forward mortgages simply build the fee into the rate. That's another subject for another day.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
To put this into perspective, a seventy year old customer with a two hundred thousand dollar home would be entitled to borrow roughly $130,000 with an FHA insured mortgage.
Non-FHA products are not really in existence anymore. However, Fannie Mae had one prior to dumping it in the fall of '08. Here is one of the reasons why it's gone. The same customer would have been eligible to receive less than one hundred thousand dollars.
The HUD backed product is far more potent than the other products because the insurance covers lender losses. With their bets hedged reverse mortgage lenders could simply lend more money.
Companies are now going out of business because more is owed on mortgages than the home is actually worth. FHA mortgage insurance covers a reverse mortgage company in this circumstance.
Yes, people are going to moan and groan about the cost to get a reverse mortgage. They will do so until doomsday, but remember, these costs are the mechanism that solves financial problems for so many seniors.
I believe I'm a poor salesman. As such I dive right in and tell my customers straight away, "The closing costs for your reverse mortgage will be higher than you might think".
Reverse mortgages, which are insured by HUD, have high closing costs for multiple reasons... It starts with the lender charging costs based on the home's value. Forward mortgages charge costs on the actual loan amount, which is going to be less than value.
Also, the lender charges a fee for originating the loan called (no surprise) an origination fee. this can be 1% higher than forward mortgages. Finally, FHA's mortgage insurance premium is 2% of valuation, up to $417,000.
You don't need to pull out the calculator to get the basic gist... Costs are not so customer relations friendly.
One could argue the origination fee is not really higher than a typical mortgage, because forward mortgages simply build the fee into the rate. That's another subject for another day.
Much of the differences in comparing closing costs between forward and reverse mortgages comes down to the FHA upfront mortgage insurance. For a home valued at $417,000 just the MIP is over $8,000. It's no doubt a bundle, but without it, most of the same people griping about costs couldn't use this tool.
To put this into perspective, a seventy year old customer with a two hundred thousand dollar home would be entitled to borrow roughly $130,000 with an FHA insured mortgage.
Non-FHA products are not really in existence anymore. However, Fannie Mae had one prior to dumping it in the fall of '08. Here is one of the reasons why it's gone. The same customer would have been eligible to receive less than one hundred thousand dollars.
The HUD backed product is far more potent than the other products because the insurance covers lender losses. With their bets hedged reverse mortgage lenders could simply lend more money.
Companies are now going out of business because more is owed on mortgages than the home is actually worth. FHA mortgage insurance covers a reverse mortgage company in this circumstance.
Yes, people are going to moan and groan about the cost to get a reverse mortgage. They will do so until doomsday, but remember, these costs are the mechanism that solves financial problems for so many seniors.
About the Author:
2 tremendous resources to help prospective Texas reverse mortgage customers get a grasp of and help decide if the Texas reverse mortgage is a viable option click on either of the 2 links in this section.
posted by Credit Counseling at
10:27 PM
0 Comments:
Post a Comment
Subscribe to Post Comments [Atom]
<< Home