Yes there is a cost to securing a reverse home mortgage. The good news is that the four types of fees, plus interest, are common for all mortgage loans. The four fees are typical and are an origination fee, third-party closing costs, mortgage insurance premiums, and a small monthly fee. There is an option to roll the fees into the mortgage if that would work best for you.
The interest is determined by the Total Annual Loan Cost and can be compared to the APR (annual percentage rate) of common forward mortgage loans. There is one fee that must be paid upfront and cannot be rolled into the mortgage amount. This is the fee for the required HUD counseling service. Interests rates determine the actual interest cost and that can be determined by the rate you have secured.
Reverse home mortgages are currently available in two interest rate options. Each can be beneficial and you should assess your need before selecting which option works best for you. The first option is the fixed-interest rate. With a fixed-interest rate borrowers are locked into the current rate for the life of the loan. With this option the borrower would receive a one-time lump sum payment. This can be a good option for those who need access to a larger amount of funds.
The second option is the variable-interest rate. This option means that as interest rates fluctuate the interest being accrued will also vary. There is a bit more risk involved but also a lot more choice to the borrower. The choices involved with a variable-rate option are that it offers the greatest amount allowed in equity for disbursement to the borrower. With a variable-rate there are choices for an immediate advance of funds and provides several options for disbursement of funds.
With the variable-interest rate the borrower has many options of distribution to choose from. The borrower can choose to have the funds as a line of credit, paid out in monthly installments or in a lump sum payment, as well as any combination of these options. The borrower can also change the way the funds are distributed at any time without cost. You plan how to use the funds and which option would provide what you need.
All mortgages have fees and the reverse home mortgage is no different except that you are given the equity you earned, you are allowed to choose how to use it, and the funds are yours for as long as you live in your home.
The interest is determined by the Total Annual Loan Cost and can be compared to the APR (annual percentage rate) of common forward mortgage loans. There is one fee that must be paid upfront and cannot be rolled into the mortgage amount. This is the fee for the required HUD counseling service. Interests rates determine the actual interest cost and that can be determined by the rate you have secured.
Reverse home mortgages are currently available in two interest rate options. Each can be beneficial and you should assess your need before selecting which option works best for you. The first option is the fixed-interest rate. With a fixed-interest rate borrowers are locked into the current rate for the life of the loan. With this option the borrower would receive a one-time lump sum payment. This can be a good option for those who need access to a larger amount of funds.
The second option is the variable-interest rate. This option means that as interest rates fluctuate the interest being accrued will also vary. There is a bit more risk involved but also a lot more choice to the borrower. The choices involved with a variable-rate option are that it offers the greatest amount allowed in equity for disbursement to the borrower. With a variable-rate there are choices for an immediate advance of funds and provides several options for disbursement of funds.
With the variable-interest rate the borrower has many options of distribution to choose from. The borrower can choose to have the funds as a line of credit, paid out in monthly installments or in a lump sum payment, as well as any combination of these options. The borrower can also change the way the funds are distributed at any time without cost. You plan how to use the funds and which option would provide what you need.
All mortgages have fees and the reverse home mortgage is no different except that you are given the equity you earned, you are allowed to choose how to use it, and the funds are yours for as long as you live in your home.
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If you would like to learn more about California Reverse Mortgages visit our website, Reverse Home Mortgage 101 for complete Reverse Mortgage information and resources.
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