Minnesota Reverse Mortgage Costs

As with a conventional mortgage, the closing costs for reverse mortgages may vary depending on the home value and the complexity of the loan. The fees associated with the reverse mortgage are fully financed as part of the loan with no out of pocket expenses (other than the appraisal). Lenders will provide Good Faith Estimates upon application. To learn how the reverse mortgage closing costs compare to conventional mortgage costs click here. The closing costs for Minnesota Reverse Mortgages include:

 Servicing Fee

Origination Fee

Pays the loan officer’s salary, the processing, underwriting, and administrative costs (overhead, equipment, health insurance, etc.) associated in originating the loan. HUD guidelines are 2% on the first $200,000, 1% thereafter with a cap of $6,000 of the home value or maximum claim amount, whichever is higher and a minimum of $2,500.

The origination fee on the Reverse Mortgage is an initial closing cost. Conventional loans will have additional charges at end of loan and/or charges will be incorporated into interest expense. The origination fee on a Reverse Mortgage is based on the appraised home value or maximum claim amount/lending limit because:

  • Loan balance rises and could equal home value or more.
  • Loans are insured against future market value of home.
  • Loan is based on full value of home, it is not a partial loan.
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FHA Mortgage Insurance Premium (MIP)
A required charge from FHA. The up-front MIP is 2% of the property value or mortgage lending limit, whichever is less. The on-going MIP is .5%.  FHA insuring the loan keeps the interest rate low and allows more dollars to be loaned than with proprietary programs. FHA guarantees the funds are available for the borrower and that the borrower or their heirs are not personally liable to repay the loan.  The insurance protects the investors against risk and loss.
 

Appraisal
Fee for FHA licensed appraiser to determine the market value of the property.
 

Credit Report Fee
This is to check if there are any liens or judgments against the property.
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Flood Certification Fee
This is verifying whether flood insurance is a requirement or not.
 

Courier Fee
To send pay offs to a current lender if there is one. To send documents from the processor to the title company and the title company to send them to the loan funder.
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Escrow, Settlement or Closing Fee
Charged by the title company for handling the title work and closing of the loan.
 

Abstract or Title Search
Charge for searching the county records.
 

Title Examination
Pays for the examiner to review the title and prepare commitment.
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Document Preparation Fee
Charged by a specialized company to prepare the closing loan documents. They verify the laws and regulations are met in the documents.
 

Title Insurance
Title company’s insurance on the property. This protects the lender against issues that may occur with the title if something was missed during the search or against hidden risks or unknown issues that may occur in the future regarding property ownership
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Recording Fees
Fees for recording documents with the county such as deeds, mortgage, county taxes, bankruptcy, name change due to divorce or loss of spouse, etc.
 

County Tax/Mortgage Registration Tax
Tax required in Minnesota collected by the county.
   

Survey/Plat Drawing
Fee for obtaining and reviewing the plat drawing.
 

Name Search
Fee for checking names of those on title.
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Special Assessment Search
Fee to check if there are any special assessments on the property that may need to be paid.
   

Miscellaneous Fees
The appraiser may call for a water test to check for chemicals including lead for those who have a well and/or septic. A pest inspection may also be required by a licensed inspector.
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Counseling Fee
Borrowers are required to receive third part counseling prior to lenders processing the loan. HUD allows counselors to charge up to $125 per session.
 

When compared to a conventional mortgage, the costs are comparable. The third party fees (appraiser, title company, recording fees) are the same as with a conventional/”forward” mortgage. In comparison the difference is the FHA Mortgage Insurance Premium. HUD regulates the fees and the borrower pays only the fees charged, there are no mark ups. And in the big picture the reverse mortgage costs less since the interest rate on the reverse mortgage is so much lower than a conventional loan.

Although not an initial or closing cost, another cost of the reverse mortgage may be a servicing fee.  With the current reverse mortgage options servicing fees are not being charged on the HECM.  However with the past HECM reverse mortgage products a servicing fee was required.

Monthly Servicing Fee

The companies servicing the Reverse Mortgage (servicers) receive a fee for servicing the loans. This covers the record keeping, sending payments and loan advances, transferring insurance premiums, verifying taxes and insurances are paid, sending monthly & annual statements, communications with borrowers, verifying residences of borrowers, and communications when loan is due and payable including handling payoffs along with working with HUD.

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To work with someone who knows, discloses,
and only charges the allowable fees, call:
Reverse Mortgages SIDAC

The Experts Excelling In Service
651-762-9648     Toll Free 877-590-9648