What Are Reverse Mortgage Closing Costs
When you take out a reverse mortgage, there are several costs involved, many of which would apply for a conventional mortgage. They are fairly simple, though, and dont require a reverse mortgage costs calculator.
You will need to have an appraisal carried out beforehand, to provide an accurate evaluation of your home. This usually costs around $300-400.
Another reverse mortgage closing cost is the expense of hiring a lawyer. While HomeEquity Banks lawyers will carry out most of the legal work, you will still need to hire your own lawyer to provide you with independent legal advice. This can cost anywhere between $400 to $700, depending on your situation and who you hire. This is an important step, designed for your protection: HomeEquity Bank wants to ensure that you fully understand all the features of the CHIP Reverse Mortgage® before you decide to proceed.
HomeEquity Bank also charges its customers a flat fee for closing and administrative costs. This fee covers a number of obligatory legal processes, such as a title search, title insurance and other administrative costs. This reverse mortgage closing cost can range from $1,795 to $1,995. You can see the current reverse mortgage rates here.
In total, your reverse mortgage closing costs can be between $2,495 and $3,095. And if youre wondering how long a reverse mortgage takes to close, it will depend on your individual circumstances and if any additional paperwork is required.
How To Avoid Reverse Mortgage Foreclosure
- Communicate with the loan servicer as often as possible. Its important to stay in regular contact with the loan servicer, especially if you need to request extensions to work out a settlement plan.
- Request a repayment plan. Some loan servicers may offer a repayment plan if you qualify.
- Get help from a HUD counselor. A HUD counselor is trained to provide information about foreclosure prevention and may be able to give you helpful tips to avoid foreclosure.
- Refinance to a regular mortgage. You may be able to refinance to a regular, forward mortgage if you meet minimum mortgage requirements.
- Sell your home. A surviving owner or heir can sell the home for 95% of its appraised value without worrying about repaying any reverse mortgage balance above that amount.
- Repay your reverse mortgage with cash. This may be an option for heirs that want to keep the property in the family if they have the cash resources to pay off the loan balance.
- Offer a deed-in-lieu of foreclosure. If no repayment is possible and the heirs dont want to take responsibility for the sale of the home, the deed can be given back to the lender instead of going through foreclosure.
THINGS YOU SHOULD KNOW
If your spouse took out a reverse mortgage but didnt include you on the title because you are under 62 years of age, you may still be able to stay in the home as an eligible non-borrowing spouse if you meet these five conditions:
Where Can I Get Help If I Am Struggling To Pay My Property
Your reverse mortgage servicer may have resources available to assist you. If youve reached out to your servicer and still need assistance, it is strongly recommended and encouraged that you contact a HUD-approved housing counseling agency.
Your counselor will help you review your financial situation and work with your mortgage servicer. In addition, your counselor will be able to refer you to other resources that might assist you in balancing your budget and retaining your home. Ask your reverse mortgage servicer to put you in touch with a HUD-approved counseling agency if youre interested in speaking with a housing counselor.
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What Happens When The Borrower Stops Using The Mortgaged Property As His Principal Residence
If the borrower stops using the mortgaged property as his principal residence for a period of 12 months , then reverse mortgage foreclosure proceedings may be initiated by the lender.
However, if a co-borrower continues occupying the mortgaged property, then the home cannot be foreclosed as long as the co-borrower continues to comply with the reverse mortgage requirements.
How Does A Reverse Mortgage Work When You Die
Its important to have a plan to deal with your reverse mortgage loan after you die. Family members also need to understand their options for keeping the house, as well as their payment responsibilities. Repaying the loan can get complicated, depending on how much equity you have in your house and whether you want the house to stay in your family after your death.
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Process For Hecm Mortgages Entered Into Prior To August 4 2014
In the past HECMs issued before August 4, 2014 did not provide protections for non-borrowing spouses living in the home after the death of the borrower. More recently HUD allowed such surviving non-borrowing spouses to remain in the home under the Mortgagee Optional Election if offered by their loan servicer. The MOE offering is discretionary with the lender. In order to avoid being financially penalized by HUD, the lender must either initiate foreclosure or assign the loan to HUD through the MOE process within 180 days of the borrowers death.
HUD issued revised guidelines on September 23, 2019, announced in Mortgagee Letter 2019-15, requiring servicers to notify borrowers about the existence of the MOE option and to request the names of any non-borrowing spouse living in the home who may potentially qualify for the option. The letter also indicated that there is no hard deadline for servicers to elect to offer a MOE, although lenders after March 21, 2020, may face interest curtailment due to their delay. Lenders may choose to make the MOE election available even after starting the foreclosure process.
Expanded Protections For Non
HUDs May 6th Mortgagee Letter 2021-11, effective May 6, 2021, but with a mandatory compliance date of September 3, 2021, also removes the largest remaining roadblock to non-borrowing spouses keeping their home after the borrower dies. As with the long-term care situation, where only one spouse is listed as a borrower on a HECM mortgage, issues arise where that spouse passes away and the non-borrowing spouse wishes to remain in the home. HECM reverse mortgage loans generally must be paid off when the last borrower dies, sells, or permanently relocates from the home.
Since August 4, 2014, HECM loan documents explicitly allow for a non-borrowing spouse to remain in the home after the borrowers death, until the non-borrowing spouse either dies or moves out. Mortgagee Letter 2021-11 removes the major remaining impediment to non-borrowing spouses keeping their home after the borrower dies. Non-borrowing spouses will no longer have to provide proof of good and marketable title or a legal right to remain in the home, which often required an expensive probate filing and had pushed many spouses into foreclosure.
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Senior Housing Bubble Held Together By Glue And Tax Dollars
Reverse mortgages are loans that allow seniors to take equity out of their homes to help pay for living expenses or other costs. As the equity in their home decreases, the amount of the loan increases. Unlike a traditional mortgage, seniors do not make monthly payments. The loan becomes due when the borrower dies, moves out of the house, or fails to maintain the property and pay homeowners insurance and property taxes. This type of loan is almost always insured by the Federal Housing Administration.
As financial pressures on seniors have increased, the numbers of reverse mortgages have grown, and so have the opportunities for unscrupulous lenders to take advantage of seniors. These loans are complex, expensive, and drain equity from the property, leaving seniors with very few options later in life.
I. BackgroundWhat is a reverse Mortgage?
Payment OptionsThe Role of the Federal Government.Why Seniors Take Out Reverse Mortgages Reverse Mortgages Are Bad for SeniorsReverse Mortgages are Expensive Reverse Mortgages Strip Equity from Homes and Leave Seniors without OptionsCelebrity Spokespeople
- Fred Thompson for American Advisors Group :A government insured reverse mortgage allows seniors to stay in their own home and to turn their equity into tax-free cash.
Is A Reverse Mortgage Expensive
Home equity conversion mortgages , the most common type of reverse mortgage, bring a number of fees and costs. Some are one-time fees, and some are ongoing costs.
Before even taking on the reverse mortgage, all borrowers taking out a HECM reverse mortgage loan must undergo counseling from a U.S. Department of Housing and Urban Development -approved reverse mortgage counselor. Counseling costs will vary, depending on the agency and the borrowers specific circumstances. Other fees include origination fees, closing costs, and mortgage insurance premiums. Youll also have to pay servicing fees to the lender for costs such as sending account statements, distributing loan proceeds, and making certain that you keep up with the loan requirements.
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What To Do If You Suspect Reverse Mortgage Abuse
If you suspect that a lender is engaging in reverse mortgage abuse during the loan process, you should immediately consult with a well qualified and experienced real estate attorney. An experienced real estate attorney can determine if the lender has violated the law, as well as help you file a complaint against them.
Can You Refinance A Reverse Mortgage
Yes. You can refinance a reverse mortgage as long as it has been at least 18 months since you closed on the original reverse mortgage. Due to the exceptionally high origination fee and other fees, refinancing a reverse mortgage should be reserved for situations where a spouse needs to be added to the loan, more equity is needed, or the interest rate can be lowered substantially.
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What Is Private Mortgage Insurance And How Will It Affect My Reverse Mortgage
Private mortgage insurance or PMI is an insurance policy taken out and paid for by a borrower for the benefit of the lender. Whether the reverse mortgage loan is made in accordance with the HECM program or New York Real Property Section 280 or 280-a , it is likely that an additional monthly amount will be added to the balance of your reverse mortgage to cover the cost of the PMI. It is important that you discuss the financial impact of PMI with your lender and a housing counselor or attorney before getting a reverse mortgage.
The Borrower Does Not Uphold Their Obligations Of The Loan
When taking out a reverse mortgage, the borrower will still have certain obligations they must meet. These include paying the property taxes, maintaining adequate homeowners insurance, and making sure the property is kept in good condition. In the event that the borrower does not uphold these obligations, they will be in violation of the mortgage and the loan will become due and payable. Before foreclosing, however, the lender must typically provide the borrower with the opportunity to fix the deficiency. For example, if a borrower fell behind on their property taxes and the lender wanted to foreclose, they must provide the borrower with the opportunity to bring their property taxes up to date.
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Foreclosures Siphon Life From Struggling Neighborhoods
The scar reverse mortgage failures leave on neighborhoods can be seen on a drive through Chicagos South Side with longtime resident and community organizer Pat DeBonnett. A cluster of six ZIP codes together have endured more than 1,000 reverse mortgage foreclosures over the past five years higher than many entire states. Boarded up homes and empty parcels followed.
DeBonnett points out blocks in the Roseland area as absolutely devastated.
Yale and 113th fits that description. In the 60628 ZIP code, it is the epicenter of the reverse mortgage foreclosure crisis, where more homes have been seized than anywhere else in the nation.
The house at the end of the block that abuts train tracks is intact, but many others along the leafy green street are either boarded up or vacant.
Empty single-family and bungalow-style houses dot many of the blocks in neighboring Pullman, a comparatively prosperous neighborhood that is home to the A. Philip Randolph Pullman Porter Museum. Named for the fabled labor leader, the museum honors black workers contributions to American history.
About 13,000 seniors live in the 60628, where lenders wrote about 760 reverse mortgages at the height of the program, through 2009. The loan origination rate about 57 per 1,000 senior residents is more than five times the national average. The foreclosure rate is even worse: more than nine times the average.
Frazier tried to negotiate with the lender. Then her mother, Osie, died last May.
I Currently Have A Mortgage On My Home Can I Still Get A Reverse Mortgage
Yes, although any reverse mortgage lender will require that the proceeds from a reverse mortgage will first go to pay off the balance of your existing mortgage. As such, an existing mortgage will limit the amount of the net loan proceeds you will receive under a reverse mortgage. When considering whether a reverse mortgage is right for you, it is important to discuss with a housing counselor whether the net loan proceeds will be enough to enable you to live in your house. A list of New York non-profit housing counseling agencies is available.
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Reverse Mortgages Your Spouse And Your Heirs
Both spouses have to consent to the loan, but both dont have to be borrowers, and this arrangement can create problems. If two spouses live together in a home but only one spouse is named as the borrower on the reverse mortgage, then the other spouse is at risk of losing the home if the borrowing spouse dies first. A reverse mortgage must be repaid when the borrower dies, and its usually repaid by selling the house. If the surviving spouse wants to keep the home, then the mortgage loan will have to be repaid through other means, possibly through an expensive refinance.
Only one spouse might be a borrower if only one spouse holds title to the house, perhaps because it was inherited or because its ownership predates the marriage. Ideally, both spouses will hold title and both will be borrowers on the reverse mortgage so that when the first spouse dies, the other spouse continues to have access to the reverse mortgage proceeds and can continue living in the house until death. The non-borrowing spouse could even lose the home if the borrowing spouse had to move into an assisted living facility or nursing home for a year or longer.
Borrowers With Regular Or Forward Loans Were Not So Lucky
Many of them paid interest on loans that were well above the current value of the homes when the values dropped and some paid until they could not pay any longer and then they had no home to live in anymore and no money to start over.
Your mom was guaranteed a home to live in for as long as she wanted/could and did not have to pay any monthly payments for the entire time she lived there .
Many times, those forward borrowers found themselves with no place to live and no money because they were struggling to make mortgage payments during that time. Your mom has made no payments on her loan for the last 9 years.
Please forgive me I am not insensitive to your moms situation.
It just was not the reverse mortgages fault that the entire economy fell apart and that property values plummeted.
I guess I just look at it a different way, thank goodness mom had a reverse mortgage and not a forward mortgage that may have required her to lose the home earlier without the protections that she has had.
As for the current situation, your mom does not need to worry about anything.
She can move out at her leisure and then once she is out and you have moved all her belongings if none of the other family members want the home, simply call the servicer, and tell them she is out.
They will move to take the property back and you will not even need the assistance of an attorney.
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How Is Reverse Mortgage Paid Back
The most common method of repayment is by selling the home, where proceeds from the sale are then used to repay the reverse mortgage loan in full. Either you or your heirs would typically take responsibility for the transaction and receive any remaining equity in the home after the reverse mortgage loan is repaid.
How Will I Receive My Money
Reverse mortgage proceeds can be distributed in a variety of ways, such as immediate cash advance, line of credit, or monthly cash advance. Not every option will be available to every borrower, so it is important to make sure you understand your options by talking to your lender and an attorney or housing counselor.
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What If I Am Already In Default
Even if you are in default, options may still be available. As a first step, contact your reverse mortgage servicer and explain your situation. Depending on your circumstances, your servicer may be able to help you repay your debts or gracefully exit your home. You can also contact a HUD-approved counseling agency for more information about your situation and options to help you avoid foreclosure. Ask your reverse mortgage servicer to put you in touch with a HUD-approved counseling agency if youre interested in speaking with a housing counselor.