When speaking to Realtors, and even other mortgage brokers/lenders, etc., those that frown upon Reverse Mortgages often list their costs as way to high as one of their reasons they steer their clients away from them. As a Certified Mortgage Notary Signing Agent, I see all kinds of loans, and while I have always said that I felt their costs were in line with regular mortgages (IF you could take out the required Mortgage Insurance) I never actually sat down and computed the difference. Until now!
I do not remember how to calculate all the statistics as far as probability, and +/- differences, but here are the hard facts from about 5% of my loans. Most figures did not surprise me, some did, so here they are:
Average Reverse Mortgage Loan Amount - $205,462
Average Loan Origination Amount $4,059 - 2.0% (Highest 2%, lowest 1.8%)
Average Mortgage Insurance Amount $4,088 - 2.0%
Average other closing Amount $4,739 - 2.3%
Total closing costs $12,886 - 6.3% >>(without Mortgage Insurance $8,798 - 4.3%)<<
Average Regular Mortgage Loan Amount - $171,067
Average Loan Origination Amount $4,390 - 2.6% (Highest 4.9%, lowest fee 0.3% -
one was 0%!)
Average Mortgage Insurance $124 - .1% Average VA Fund $24 - 0.01%
Average Amount to bring to 1st of the month $165 - .1%
Average other closing Amount $2,190 - 1.3%
Total Closing costs $6,894 - 4.0%
I noticed the loan origination fees were always the 2% maximum allowed on the Reverse Mortgages except one which was less. On the forward mortgages, they average 2.6%, and two actually impressed me and had very little origination fees - including one that had none. I wonder about that one, as maybe there was a YSP, or something just not listed anywhere, but that was how it was listed anyway! 60% exceeded 2%, so the other 40% were less than the 2% charged. Prior to doing the actual computations, I thought forward mortgages averaged a much higher rate, so that actually surprised me that it was only .6% higher than average Reverse Mortgage origination fees. Another thing that caught my attention was how the other closing costs were a bit higher on Reverse Mortgages than forward mortgages. Although, in the end, like I have been saying all along, IF you could back out the required Mortgage Insurance, the closing costs ARE right in line with all other mortgages 4.3% RM to 4.0% Regular. As I said in the beginning, without doing all the actual statistics, in my opinion, to differentiate in closing costs by only 0.3% is pretty much very close!
In my mind, I always said that the closing costs were close (without the MIP) and these statistics back up what I felt all along. Some surprises, but not too many! Of course, the MIP is required for a very good reason, and certainly with it, it does boost the final costs, but always knowing both you and your heirs will never be burdened with a loan that exceeds the value of your home is not only a requirement for a good reason, but certainly a great piece of mind!
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