Reverse Mortgage Costs And Fees
Quite often we get asked the question about what hidden or buried costs there are in a reverse mortgage.

This is largely because the whole product can come across of having a feeling of being too good to be true.  Being sceptical like this is a good thing considering how many financial products out there bury their costs or have hidden fees that you don’t learn about until it is too late.

Today, in response to many of the queries on this, I thought I’d go through all the costs involved in setting this up.

That is, the initial costs before you do anything else.

This will include every single cost you need to know about – you can factor these into your decision.

The best way to think about reverse mortgage costs are to split them between costs that must be paid upfront (by you) and costs that deducted from the amount you borrow (you don’t actually pay these yourself):

1. Costs You Pay Upfront – Out Of Pocket Costs: $150-400

Let me first clarify what I mean by ‘out of pocket’.

This means that you have to pay these costs upfront and there is no other option or way to pay them.  The phrase – for those not familiar with it – comes from taking the cash out of your pocket and giving it to someone.

So what ‘out of pocket’ costs are there?

Well, the good news is that there is only one: the appraisal.

Appraisal costs will depend on where you are in Canada but you are talking about something in the range of $150-400 – with most coming close to the $300 range.

Why is an appraisal required?

Well you have to remember that the lender isn’t going to take any payments from you.  They are lending solely on the basis that they believe your home will continue to grow in value and that they’d like a share of that value.

This is from a lenders perspective – ownership of many homes across Canada.  So they absolutely must ensure that your home is a good investment for them.

So, this means that they must appraise your home.  A home appraiser is looking for 3 things:

  • What is the house worth based on current market value?
  • Any issues that they should be aware of that might impede future home value growth?
  • The marketability of the home – that is how easy would it be to sell it (if they needed to) once the homeowners passed away?

Like anything, there is good news and bad news about this:

The good news?  This is the only upfront cost you actually have to pay (by cash or credit card).

The bad news?  This cost is payable even if you later decide not to take out the mortgage.  Unfortunately, there are no refunds on this.

What my suggestion would be is that if you have paid for an appraisal, but no longer wish to pursue this, that you try to use it to secure a ‘regular’ mortgage or Home Equity Line Of Credit – usually either of these will need an appraisal anyway (especially if you are refinancing).

2. Costs You Have To Pay But That Are Deducted From The Amount Borrowed

These costs – rather than being upfront costs that you have to pay out of your own pocket – can be deducted from the amount that you receive.

So lets say you arrange a reverse mortgage for $150,000 and these costs are $2,000.  Then you will receive $148,000 instead.

You can choose to pay them if you like but almost every single person chooses to have them deducted from the amount borrowed instead.

These are split between two different sets of legal costs:

a. Independent legal advice: $450-700

There are two aspects to legal fees that you are looking at:

  • Legally registering the mortgage on title.  We will come to this in part b.
  • Independent legal advice – unlike the above element, this is a requirement of the lender and is a very important one. It ensures that you don’t sign anything or feel like you were ‘pushed’ into this product without consulting an independent legal expert.

Like appraisals, legal fees vary across Canada and from lawyer to lawyer.  While $450 to $700 covers all ranges, generally they are around $600.

Remember: you don’t actually pay these upfront though – they are deducted from the amount you borrow.

b.  Legal, administrative and set-up costs: $1,795

These are with regards to the legal cost of registering of the mortgage on title – including all other lender, administrative and other fees. Note this fee was recently increased to $1,795, in March 2018.

Every single mortgage in the whole of Canada incurs a similar cost to this.

It is unavoidable – part of our mortgage laws.  Whether you are getting a Home Equity Line Of Credit (HELOC), ‘normal’ mortgage or reverse mortgage – you must pay a lawyer to register the mortgage on title – regardless of what type of mortgage you are getting.

A lot of people forget when they first bought a home that they incurred these costs and had to involve a mortgage lawyer – as a reverse mortgage is still technically a mortgage, a lawyer must be involved to place the mortgage on title.

Again – like independent legal advice – these costs are deducted from the amount that you receive.

The CHIP Reverse Mortgage In Canada

All of the advice in this article relates to the CHIP reverse mortgage – if you are unsure about what this is then I suggest you read our free guidebook (get your copy here) – it outlines everything you need to know about this mortgage loan.

In Summary – Reverse Mortgage Costs And Fees

That is it – there are no other fees or costs involved in setting up a reverse mortgage in Canada.

While the amounts can vary (it is really hard to predict what appraisals or lawyers will cost as they vary widely from province to province, city to city and lawyer to lawyer) –  these are all the costs at this point in time.

And remember, in terms of upfront costs that you actually have to pay in cash (or by credit  card) you are only talking around $150-400.

Here is a short table to summarize the costs/fees:

Reverse Mortgage Costs - Summary Table

CostRange'Normal' Amount
Upfront costs - must be paid by cash or credit card:
Appraisal$150-400$300


Costs that must be paid but are deducted from the loan amount:
a. Independent legal advice$450-700$600
b. Legal title registration and administrative fees$1,795$1,795


Total - costs you pay out of pocket


$150-400


$300
Total - maximum possible costs$2,395-$2,895$2,695

What About Rates?

Yes, of course the interest rates are also a part of the reverse mortgage costs – even though you don’t actually pay these. This is covered in detail on our article – which also includes the latest rates – at https://www.reversemortgagepros.ca/rates-and-penalties/.

Alternatives To A Reverse Mortgage

It should also be noted that costs and fees for setting up this are very similar to the alternatives out there.  For more on this, see this article we wrote:
https://www.reversemortgagepros.ca/alternatives/

Reverse Mortgage vs Home Equity Line Of Credit

Most people are usually considering a Home Equity Line Of Credit – which comes with almost identical set-up costs (minus the administrative fee – although some lenders do charge set-up fees). See our article comparing this to a HELOC for more on this:

https://www.reversemortgagepros.ca/vs-heloc/

As always, if you have any questions regarding reverse mortgage costs and fees then feel free to leave a comment below.


Mich

The #1 reverse mortgage specialists in Canada.

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chandru kriplani

Do you respect the confidentiality of a potential client who shares sensitive personal financial information with you while considering this product in his personal circumstances?

B Jensen

It would be greatly appreciated if a chart showing the interest amounts payable and calculations of same interest. I do recognize interest fluctuations will affect the chart. No where can I find information on this. Thank you for your help.

Rosemary

How does it work if a person has declared bankruptcy in the past

Glen Eremenko

I am applying for a property tax deferment in British Columbia. It is a low interest bearing loan that does not have to be repaid until the house is sold. There would be a registered lien on the property. Taxes are about $3,500 per year. Would these facts affect the application for a reverse mortgage?

john

question how would rev mortgage effect enhareitance eg. can party/use todays rates and locke into same

francine

if my house is word 226.000.00 how much would i qualify for

Mother is owner, no mortgage. She’s 86 and she will be on the Rev. But before
she passes can I (son 61) be put on the title at a later date so I don’t have to sell
and get out when she’s gone.

BRYAN

IS THE INVESTORS GROUP REVERSE MORTGAGE ANY BETTER THAN THE REST. THE ONLY THING IS THAT THE INTEREST IS PAID EVERY MONTH INSTEAD OF COMPOUNDING TILL THE END.IS THERE ANYONE OUT THERE THAT YOU WOULD RECOMMEND??
THANK YOU.

Chris Spratt

When it comes to independent legal advice, may I use my own lawyer or only one the lender wishes me to use?

Liza Jane

Would it be possible to receive a copy to the Reverse Mortgage so that I can read it and have on hand to understand all it implies.

Paula

My husband is very ill and I have full power of attorney. Will this complicate the process? The reverse mortgage will also assist with his care.

Florian Filyk

Thank you for all the information. I have not yet decided what to do but I do understand how it works.

s Johnson

Thank you for great articles – tried a well-advertised company for on-line info first and despite the “come-on”, no information was provided at all unless you were willing to put in all personal information first. Hubby and I are in our 60’s, healthy, and probably not in our last house yet so while we might be interested down the road, not yet. At this point, based on my experience so far, I certainly have a much higher opinion of your Company than the other and thought you might like to know that.

Joe

Is the interest compounded on a CHIP reverse mortgage and how often is the interest calculated and compounded/added to the amount owing?

Marilyn Fraser

We are just beginning to look at reverse mortgages because, as you pointed out, Chip made it sound like it was too good to be true. We were really excited. Now we will take more time to study the ramifications more closely.

murray

the 10% your allowed to pay each o year, is it on principal only? [ it would be nice ] or total amount ?

Dorothy

Hi,

Can one apply for a reverse mortgage right after purchasing new property? I will be paying cash for the purchase but that will mean I won’t have much to sustain me (I am not working at the moment). Didn’t want to bother with a loan/mortgage as my credit isn’t that good…

Angela

Hi, I have a question about my friend. She owns a home worth $800,000, however, she currently has a HELOC on it at $350K, and she is paying for the monthly interest. She is 53, can she apply for reverse mortgage when she is 55?

Thanks,

Angela

Robert Cole

The mortgage is registered under two names but the second person is deceased now do I have to re-register our mortgage under my name alone in order to qualify for a reverse mortgage?

Michael William O'Malley

What if the husband is 69 and the wife is only 52, would we still qualify for the reverse mortgage?

John Christensen

I am late filing my latest year tax return. Does that affect my application?

Randy Wiggins

I have a couple questions. First my spouse & I are both over 55 but are living common law for a couple years now. We are not married. Would we qualify for this? Second I have owned my home for 15 years now and am the sole owner on the land title. My problem is my ex from a previous common law relationship and I have been going through a lengthy court battle and her lawyer put a Liz Pendant on my house. I don’t want to pay all these fees then find out I was turned down. Are you… Read more »

W Baillie

I appreciated the well documented articles on reverse mortgages. I would like to see mention of the “rule of 72” for calculating growth of debt added.

I have a house with a $100,000 mortgage and we are 60 and 59. I am on CPP disability;so
will I qualify? I want to pay off all my small bills and be able to start paying on the HELOC.

Liz Tarczy

When the house is sold at my demise (around 20 more years hopefully!), are there closing costs on a reverse mortgage?

dot

our home is only registered in my husbands name. and since he is now sick n not working . so we thought of getting a reverse mortgage to make it easier on us. so what I want to know is in a reverse mortgage it would mean paying off the existing mortgage plus we would like to borrow more. could the reverse mortgage be put in both our names or even transfered to just my name even though right now only his is on title.. also when he dies would I have to sell the house n pay it off… Read more »

Keijo Rantala

What happens when it’s time to sell and what is owed is more than what the house sells for? Is it simply a matter like Amy other loan in that you still owe the money? Doing some math, I would owe the house’s value after 10 years. What if I stayed 20?

Debbis Adams

I’m looking at a Manulife Equity Advantage.I’m told the current rate is 3.94% and you don’t have to pay the interest.What are your thought’s on this product?
Dennis Adams

Pam shetterly

As we are considered low income I wonder will this still be possible for us to look at as an option or is there an income requirement

Edward

Do I have to pay the $15000 transfer tax in BC

Jennylind Paterson

I am a little confused. Do I have to pay interest even if I get a reverse mortgage.? I thought the reverse mortgage included that.

pat donovan

Does the appraiser value the whole property as in outbuilding separate, gardens, trees, and expansive view. Second will a child be able to inherit the home by paying off the reverse mortgage debt and would that child incur any penalties not mentioned.

pat donovan

and who does the appraisal in the local setting. Any appraiser or do you use a special company.

Bea

If I got a reverse mortgage and decided to sell before 1 year how much interest would I have to pay

Robert

My wife and I are separated. A divorce settlement is in negotiation and will obviously include the house. Otherwise I / we both meet the reverse mortgage requirements. A couple of questions:
1. The house must be appraised ( for a second time, I did it last year for the same purpose and the appraiser is on the approved list), could either appraisal be used for a reversed mortgage. or would a 3rd appraisal be required?
2. I assume that I should wait until the divorce is settled to apply, as title will be in my name.

Sherry Montgomery

why does CHIP not give you a copy of your appraisal???..when I’ve paid for it?…I’m not saying they would be dishonest but not having the hard copy myself makes me uneasy.

Dianne

My ex husband co-signed a mortgage for me as I didn’t qualify on my own (income doesn’t support the mortgage amount). When it’s comes to renew, he has stated he no longer wishes to be a co-signed and wants his name taken off the title as he wants to buy a place for himself. I still won’t qualify on my own when this time comes. My place is valued at $600k. I will be 57 at time of renewal and my mortgage amount will be approx. $290k. Can I convert the existing mortgage and HELOC into a reverse mortgage? What… Read more »

Tony

My wife has been the only one on title in our home since day one. She owns the home.
That being said, would you only collect her information during the set up of a RM or do you also require mine? And if you need mine also, why? Since I don’t own the home?