The Cost of a Reverse Mortgage

Our last post on reversible mortgages generated a question about fees and expenses. Most mortgage broker sites we have come across only glorify the reverse mortgage and never mention fees, so we wanted to detail reverse mortgage fees that a typical consumer might face.

Reverse Mortgage Fee – Make an Informed Decision

First, you should be very clear of any reverse mortgages fees before you start the application process. Just like buying a car, you don’t want to find out about unexpected reverse mortgage expenses once you have already emotionally committed. Make sure the reversible mortgage lender is crystal clear from the get-go about what fees you can expect. Don’t be embarrassed to ask questions, the informed consumer is the one who gets the best deal!

Reverse Mortgage Costs Comparison

There are only two reverse mortgage brokers in Canada, Seniors Money and CHIP. Each charges different reversible mortgage fee amounts, which are outlined below.

Seniors Money Reverse Mortgage costs
There is an initial set-up fee of $1275 with Seniors Money, which includes the cost of a third-party appraiser. Seniors Money offers an Equity Protection Option, which will ensure that certain amount of equity remains in the house, for a one-time fee of $295. They also offer a Top-Up Option at $95 per advance.

CHIP Reverse Mortgage costs
CHIP charges an initial reversible mortgage set-up fee of $1485, which does not cover a third-party home appraisal. With CHIP, you will be required to pay for your own home appraisal, a cost that CHIP quotes at $175 – $400. They do not offer any additional reversible mortgage options like Seniors Money does.

Legal Counsel for a Reverse Mortgage

Both CHIP and Seniors Money require you obtain independent legal advice before closing a reverse mortgage. This is to make certain that you fully understand the reverse mortgage before you enter into it. You will sign the reversible mortgage documents with the lawyer, who returns it to the lender. This legal advice will typically cost $200 – $700.

Reversible Mortgage Fees are Financeable

Both lenders can deduct all the expenses of reversing your mortgage, except the independent legal and appraisal fees. The fee expenses are then added to the mortgage debt. Unless you are strapped for cash, you should just pay the fees out of your own pocket. Why? Because if you finance these fees, you will be paying them off over the course of many years, adding unnecessary interest that you must pay.

Total Reverse Mortgage Fees

Depending on which reverse mortgage provider you go with the total costs can range from about $1800 with Seniors Money (assuming a $500 legal bill), to about $2300 with CHIP (assuming a $500 legal bill and a $250 appraisal cost).

Which reverse mortgage lender is right for you depends on a whole lot more than the fees. Make sure to do your homework and pick the right lender for you.