MN Reverse Mortgage Costs

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

Covers the lender’s time and costs associates with originating the loan including: 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% on the balance 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 during the life of the loan.
  • 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 the mortgage lending limit, whichever is less. The on-going MIP is 0.5%. FHA insuring the loan often keeps the interest rate lower 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 MIP protects the investors against risk and loss.

Fee for FHA licensed appraiser to determine the market value of the property. Includes a management fee for an independent company to order the appraisal. An appraisal management company is required by law to order the appraisal. This fee is generally paid out-of-pocket by borrower.

Credit Report Fee
This is used for the Financial Assessment requirement to check if there are any late payments, liens or judgments against the property or individual.
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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/lender.
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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 insuring clear ownership and 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 recorded at the county.

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. A structural or engineering inspection and/or certification may also be required.

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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 generally $75  to $125 per session.  May be paid from closing or out-of-pocket.

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 may cost less since the interest rate on the reverse mortgage may be lower than a conventional loan, especially with the adjustable rate.

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 loans receive a fee for the servicing of the loans. This covers the record keeping, sending payments/draws and loan advances, transferring insurance premiums, verifying taxes and insurances are paid, sending statements, communications, etc.

Since the borrower is not making monthly payments, at the time of closing, a calculated amount totaling anticipated charges is set aside or withheld (not an initial cost), reducing the amount available to the borrower. The set-aside amount is not a cost of the loan nor does it become part of the beginning loan balance. Each month the monthly charge ($25 to $35) becomes part of the loan balance. Interest is accrued only on the amount when it added to the loan balance.

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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