Insurance

The fees on a reverse mortgage have been steadily decreasing over the past several months, and now the introduction of a program called the HECM Saver has all but eliminated the fees in a reverse loan. If you have shopped for a loan in the past but thought the fees were too high, I would suggest taking another look, because the savings can be huge. Let's go through the fees and see what you could save.

Mortgage insurance - FHA Loans have mortgage insurance (MI), and this does include reverse mortgages. While there are two kinds of MI on an FHA loan, upfront and monthly, we are going to address the upfront mortgage insurance. If your home appraised for $400,000, and the upfront mortgage insurance was 2% of the value, it would have cost you $8,000. Now this fee can be waived, saving you this upfront cost.

Origination -This fee is collected by the loan company to pay the loan officers. The maximum fee allowed is calculated with a formula, but it works out to no more than $6,000, assuming a value of properties worth $400,000 or more. Well, for several months, we have been able to waive the origination fee because the lenders are paying us directly, so you don't have to.

Service Charges - Most reverse loans had a service fee of at least 30 dollars a month that was pre-collected and called a service set aside fee. This was about $4,000 to $5,000, depending on how old you are. Currently, most of the reverse loans do not have a service fee, so this allows you access to the set aside fee.

Prior to the current loan programs and changes in the industry, you may have found yourself paying upwards of $20,000 for a loan. But now, most or all of the fees are gone or waived, so you have access to this money. I think the name HECM Saver is a good fit because it does save you quite a bit of money compared to the old program, making a reverse mortgage a very affordable loan.