There is a common impression with reverse mortgages that they cost more than other loan facilities. Here are the various costs that can come into play when availing of a reverse mortgage loan:

Interest rates – on average, a Home Equity Conversion Mortgage (HECM) or reverse mortgage loan, is 2% higher than that of a traditional mortgage or that of a credit line. But bear in mind that the cash you will get up front is tax free, and you will not be making regular monthly payments. In comparison, credit card interest rates and rates from private lending institutions are even higher and require regular repayments.

Fees – the cost of fees for a reverse mortgage are similar to that of a traditional mortgage. Normally included in the reverse mortgage fee are the appraisal, administrative, and legal fees. But do check with the bank you are applying from so there are no last-minute surprises.

Appraisal fee – if you want to go with an external appraiser, you can check if the bank will accept the valuation of a different party. Else, you may end up wasting money. Getting a high appraisal value is important, as it will affect how much you can take out from your reverse mortgage broker. This valuation also comes into play if mortgage insurance is needed.

Legal fees – when it comes to financial and legal advice, one would naturally want a party who has your best interests in mind. In fact, some banks require and independent legal counsel for the borrowing party.

• Administrative costs – charged by the bank for processing the loan.
• Home Inspection fee – required so a possible buyer is protected from hidden issues that a property may have.
• Title Insurance – often required to cover for a property dispute.
• Land Transfer Tax – a government requirement.

Some of these costs and fees may or may not be covered by the bank processing your CHIP reverse mortgage. They are not exclusive to a reverse mortgage Brampton loan and are standard for a traditional mortgage, other property-related loans, and even lines of credit. They have been enumerated here so that you are aware of the sometimes “hidden” costs that may take you by surprise.