Reverse Mortgage Longstanding and Ongoing Fees
The concept of receiving monies every month through a reverse loan can seem appealing, but a borrower should understand that he or she will still pay fees. Various ongoing fees come with reverse mortgage agreements. The following are a few of those fees. An interested homeowner should consult with a counselor before diving into a reverse mortgage deal. The deal can benefit many people, but it is not for everyone who thinks upon it.
Ongoing Service Fees
Some lenders may charge their customers fees for their ongoing loan servicing. Not all lenders do this, and the number of lenders that do is becoming smaller each year. The amount that a lender may charge per month for servicing the loan is usually low. An average of $30 is common for lenders who participate. The good news is that the borrower does not have to reach into his or her pocket and pay these fees. Service fees are fees that the lender can place on the back of the loan. Such fees would not be due until the end of the loan period. Reverse mortgage loans and their backended fees require payback when the borrower dies, sells the home, moves or conducts a huge contract breach.
Property taxes are another expense that the consumer will have to manage during the course of home ownership. Home property taxes can be as much as 2.7 percent depending on the state in which the home buyer lives. The state of Illinois currently has the highest property taxes in the United States, according to the Chicago Tribune. New Jersey and New Hampshire are additional states that have notable property tax rates that one should consider.
Reverse mortgage borrowers must pay for mortgage insurance. This coverage allows the lenders to receive monies in situations where their borrowers default on the loan. The consumer must pay an initial mortgage coverage fee when he or she closes the reverse mortgage deal. The person must also pay an ongoing annual mortgage coverage fee. The annual mortgage protection fee is another item that the borrower can place on the back of his or her loan. Homeowner’s coverage is another ongoing fee. The consumer cannot place that on the back of the reverse mortgage, however. Payment is due to the policy provider each month or year.
Life Expectancy Set Aside Fees or LESA fees are for people who do not qualify for their reverse mortgages under normal circumstances. Such people may not quality for the loan because of their credit history or the income requirements. The FHA recently revised its financial assessment guidelines and stiffened them. In the above stated situations, the lender may ask the borrower or applicant to pay Life Expectancy Set Aside fees before it grants a reverse mortgage. The fees amount to a portion of the loan proceeds, and they cover property taxes and insurance payments for the amount of time the home owner is expected to live.
How to Minimize Ongoing Fees
Many of the fees associated with reverse mortgages do not have much wiggle room. A consumer can, however, research various lenders and try to find one that does not charge service fees. A counselor can advise on other ways the consumer an save.