REVERSE MORTGAGES: Know the drawbacks
- Posted by admin on June 21st, 2007 filed in Reverse Mortgage Info
Though they still represent just a thin slice of the mortgage market, reverse mortgages have boomed. But there are some drawbacks to reverse mortgages:
High costs. Homeowners who take out a federally insured reverse mortgage, known as a Home Equity Conversion Mortgage, typically pay an origination fee of 2 percent of the home’s value, plus a mortgage insurance premium of 2 percent. Once title searches, appraisals and other expenses are included, closing costs can exceed 5 percent of the home’s value.
Loan limits. The government caps the amount you can borrow through an HECM. The limits range from $200,160 to $362,790, depending on where you live. If your home is worth $600,000, and the HECM limit for your county is $362,790, the maximum loan amount will be calculated based on a home value of $362,790.
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July 3rd, 2007 at 10:36 am
There is a mistake in the information listed above. The 2% origination fee that you speak of is not based on the homes value but on the lower of HUD’s lending limit in the area where the property is located or the homes appraised value with a minimum fee of $2,000.00. The fee structure is regulated by HUD and no lender can charge more than what HUD’s dictates.