Have you heard about a reverse mortgage product? While they may sound like a great option, many clients often have questions about hidden fees that may come along with their reverse mortgage. So, is it really too good to be true? Below I have outlined all of the costs involved in setting up your own reverse mortgage so that you won’t be left wondering about hidden fees any longer.

There are two types of costs that you will see in your reverse mortgage set up: costs that you pay upfront as you are setting up the product, and costs that will be deducted from your borrowing amount. The good news is your upfront costs will only be between $150-$400, and this cost only needs to cover one thing: the appraisal. An appraisal in necessary to satisfy the lender’s requirements, mainly that your home is a good investment for them. Since you will not be making payments back to your lender, they need to know that your home will continue to grow in value. A home appraiser will look at your home’s current market value, any issues that might impact the future value, and how easy it would be to sell your home if needed (although you will never be asked to sell your home during your reverse mortgage ownership). While the appraisal cost will vary depending on where you reside, most appraisals will be around $300. Keep in mind that your upfront fees are non-refundable, even if you decide not to take out a reverse mortgage.

Second, you will have costs that will be deducted from your borrowed amount. Technically you will be paying these costs, but it may not really feel like it since they will be taken before the borrowed amount is released to you. So, if your reverse mortgage is worth $100,000, but your costs are $1500, you will receive $98,500. These costs are divided into two types of legal costs: independent legal advice; and legal, administrative, and set up costs. The independent legal advice will cost anywhere from $450-$700, and includes getting independent legal advice on your reverse mortgage contract from a trusted legal professional. Receiving this advice is a requirement by lenders as it makes sure that no one is forced into any decisions without seeking legal advice. The second part of these fees will add up to around $1700-$1800, and includes registering the mortgage on title along with other lender administrative fees. This fee is not unique to the reverse mortgage, as all mortgages in Canada incur a similar fee as part of mortgage law.

Well, that’s it! There are no other hidden fees involved in setting up your own reverse mortgage. In total, the highest amount you can expect to pay out of pocket is $400, and paired with deductions from your borrowed amount, the maximum total is $2900. Not bad for all of the benefits that a reverse mortgage can bring!

I hope you now have a better idea of the fees and costs involved in setting up a reverse mortgage. Knowing these costs from the start can help you better plan your choices for the future and make the right decision regarding your unique circumstances. If you have further questions about reverse mortgages, or would like to start your own reverse mortgage process, contact me or apply today.