Forbes: Must-Knows About Reverse Mortgage Upfront Costs

The latest in a series of reverse mortgage articles this week, Forbes recently spotlighted the upfront costs, among the other expenses, often associated with Home Equity Conversion Mortgages (HECMs).

The article, written by Wade Pfau, a professor of retirement income at The American College in Bryn Mawr, Pa., and frequent reverse mortgage commentator, details the three main expenditures to open a HECM: upfront costs, the initial mortgage insurance premium and closing costs.

“First, the mortgage lender can charge an origination fee,” Pfau writes. “With the HECM program, these fees are currently allowed to be up to 2% of the home value for homes worth $200,000 or less.”

For homes worth between $200,000 and $400,000, Pfau notes the maximum allowed origination fee is $4,000 plus 1% of the home’s value above $200,000; whereas for homes exceeding $400,000, the maximum origination fee is $6,000. 

While these fees are the maximum amounts allowed by the government, Pfau suggests larger lenders with national advertising campaigns may charge the full amounts, “as their customers are less likely to engage in comparison shopping and may not recognize these fees as negotiable.”

He then goes on to state origination fees for smaller lenders may be much less, and that some might even provide credits rather than charges for the origination fee “as they earn revenue primarily by originating loans to sell on the secondary market rather than through charging origination fees.”

Read more at Forbes.

Written by Jason Oliva

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