A reverse mortgage could provide much-needed cash to cover costs such as basic living expenses, medical care, and home repairs. Still, numerous fees can make reverse mortgages prohibitively expensive for s🔯ome homeowners.

One particularly onerous expense is the lender-required 澳洲幸运5开奖号码历史查询:mortgage insurance premium (MIP). If you have a 澳洲幸运5开奖号𒅌码历史查询:home equity conversion 🌺mortgage (HECM)—which is backed by the federal government—then you’ll pay an initial MIP at closing plus annual MIPs for the length of the loan.

What Is a Reverse Mortgage?

A reverse ജmortgage lets you convert🌳 some of your home equity into cash without selling the home. You don’t make monthly payments to a lender; instead, the lender gives you an advance on part of your 澳洲幸运5开奖号码历史查询:home equity as a lump sum, a monthly amount, or a 澳洲幸运5开奖号码历史查询:line of credit. Interest and fees accrue over the life of the loan, which becomes due when you sell the home, move out, or die.

To qualify for a reverse mortgage, 澳洲幸运5开奖号码历史查询:you must be age 62 or older, have substantial equity in the home, and live in the home as your 澳洲幸运5开奖号码历史查询:principal residence. If you get an HECM, the most common type of reverse mortgage, you must also attend a 澳洲幸运5开奖号码历史查询:counseling session approved by the U.S. 澳洲幸运5开奖号码历史查询:Departme🏅nt of Housing and Urban 🍃Development (HUD). Once approved, you can use the cash to pay for things like basic living expenses, healthcare costs, home renovations, or even a new house if you have an 澳洲幸运5开奖号码历史查询:HECM for Purchase loan.

What Is Mortgage Insurance?

With traditional mortgages (sometimes called 澳洲幸运5开奖号码历史查询:forward mortgages), it is the lender—not you—who is protected by 澳洲幸运5开奖号码历史查询:mortgage insurance when you default on your mortgage payments, die, or are otherwise unable to meet 𒁃the mortg♋age terms.

澳洲幸运5开奖号码历史查询:Private mortgage insurance (PMI) and MIPs 澳洲幸运5开奖号码历史查询:are not the same thing. PMI is generally required on a traditional mortgage if your down payment is less than 20% of the home’s purchase price and you finance with a conventional mortgage loan. However, if the Federal Housing Administration (FHA) backs you💮r mortgage, you're required to pay MIPs. These include an 澳洲幸运5开奖号码历史查询:up-front MIP equal to 1.75% of the base loan amount, plus annual MIPs for at least 11 years, 澳洲幸运5开奖号码历史查询:regardless of the siz𒁃e of your down payment. 

Mortgage Insurance for Reverse Mortgages

Mortgage insurance works a bit differently for reverse mortgages. Instead of just protecting the lender, MIPs pr🤪ovide several important assurances to reverse mortgage borrowers.

• A borrower receives the loan payments as set out by the terms of the loan, even if the lender goes out of business.
• You or your estate can’t owe more than the home’s value when the loan becomes due and the home is sold. 
• 澳洲幸运5开奖号码历史查询:꧋If you or your heirs want to pay off the loan and keep the home (instead of selling it), you won’t owe more than the home’s 澳洲幸运5开奖号码历史查询:appraised value. 

At closing, you pay an up-front 2% MIP based on the FHA’s maximum lending limit of $1,149,825 or the home’s appraised value, whichever is less. For example, if your home is valued at $250,000, the up-front MIP would be $5,000 ($250,000 × 0.02). You can pay it in cash or use the money from your loan.

After that, your lender charges annual MIPs equal to 0.5% of the loan’s outstanding balance. These premiums generally accrue over time, and you (or your estate) pay the amount once the loan is due.

The Bottom Line

HECMs require you to pay up-front and annual MIPs. However, reverse mortgage insurance benefits the borrower, unli♕ke traditional private mortgage insurance, which protects the lender.

If you decide a re🥂verse mortgage is right for you, you could save money by shopping around and comparing loan costs. While lenders charge the same MIPs, the other loan costs—including origination fees, closing costs, servicing fees, and interest rat🎉es—vary by lender.