As in any major purchase, shopping around is important when considering reverse mortgages. Better terms and closing costs can be found by simply making a few phone calls and exploring low cost, online alternatives.
When it comes to government insured, HECM reverse mortgages, only some pieces of the reverse mortgage package is negotiable. Others are largely standardized and will not change from lender to lender.
Negotiating a Reverse Mortgage
What is Negotiable
Origination Fee: Many lenders claim that this fee is not up for negotiation. While 2% is the “standard” charge, this is the one fee where the lender has a lot of discretion to discount. Many are not flexible with this while other discount outlets will give better deals.
Service Fee: HUD sets the maximum monthly servicing fee at $35 but many lenders will give you a lower cost. Shopping around is important here, this is a quiet cost that adds up quick.
Processing Fees: Underwriting Fees, Etc: These “add on fees” are charges tacked on by the lender to cover their overhead. These should be your top priority for negotiating as they can be removed or reduced easily.
Service Fee: HUD sets the maximum monthly servicing fee at $35 but many lenders will give you a lower cost. Shopping around is important here, this is a quiet cost that adds up quick.
Processing Fees: Underwriting Fees, Etc: These “add on fees” are charges tacked on by the lender to cover their overhead. These should be your top priority for negotiating as they can be removed or reduced easily.
What is NOT Negotiable
FHA Insurance Fees: FHA charges an upfront premium of 2% and a monthly charge to insure the reverse mortgage. This fee is out of the lender’s control and will be charged identically every time.
Closing Costs: Certain closing costs, such as title insurance, appraisal, closing fees, etc. that are charged to third parties are largely not negotiable. These services will be ordered by the lender and fees are usually fairly standard.
Closing Costs: Certain closing costs, such as title insurance, appraisal, closing fees, etc. that are charged to third parties are largely not negotiable. These services will be ordered by the lender and fees are usually fairly standard.
Shopping Around for a Reverse Mortgage
When it’s time to make a decision, keep these tips in mind:
- Call or email several lenders: Three is good, more is better
- Tell the loan officer that you are shopping around: You are more likely to get a good deal if the representative knows their offer will be compared against others
- Check the Internet: Savvy shoppers can find good deals if they know where to look. One place to start is to order a free FROG report comparing several online discount lenders.