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Q: Why is there mortgage insurance on a reverse mortgage?

Mortgage insurance is required on a reverse mortgage to protect you and the lender. This insurance guarantees that you will never owe more than your home's value. If your loan balance becomes higher than your home's value, the insurance will cover the difference.

Q: Who insures reverse mortgages?

The Federal Government insures the HECM reverse mortgage program through the FHA.

Q: Do all reverse mortgage loans require mortgage insurance?

No. The HECM reverse mortgage program has mortgage insurance, but there are Non-FHA programs without mortgage insurance.

Q: How much is the mortgage insurance premium?

In 2025, the initial mortgage insurance premium for the HECM program is 2% of the property value or max claim (whichever is less). The current max claim is $1,209,750. The annual renewal is 0.50% of the loan’s outstanding balance.

Q: What does UFMIP stand for?

UFMIP stands for Up-Front Mortgage Insurance Premium.

Q: If I refinance my reverse mortgage to a new reverse mortgage, do I have to pay the full 2% mortgage insurance again?

Not the first time you refinance, but it may change if you refinance more than once. The first refinance uses 2% of the property value or the HUD maximum lending limit, whichever is less. Subsequent refinances use a formula that gives credit for previous UFMIP payments.

Q: Does mortgage insurance premium cost differ between reverse and forward mortgages?

Yes. Reverse mortgage insurance is higher because it represents a greater risk to HUD. There is no mandatory repayment date, and the loan balance grows over time. The premiums help keep the insurance fund solvent.

Q: Can reverse mortgage insurance be reduced or eliminated if the value of your home appreciates?

No. A reverse mortgage is a non-recourse loan, meaning the lender cannot seek repayment beyond the property's value, regardless of the loan balance.

Q: Does reverse mortgage insurance cover any shortfalls if the home is sold for less than its value?

Yes. The insurance covers any shortfall if the home sells for less than the loan balance.

Q: Does the mortgage insurance settle the loan upon the borrower's death?

No. Mortgage insurance covers losses lenders might incur, not the loan itself upon death. That function is characteristic of life insurance.

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Reverse Mortgage Insurance — UFMIP & MIP Costs Explained

May 16, 2024

Michael G. Branson Edited by

Cliff Auerswald

36 comments

Introduction to Reverse Mortgage Insurance

When you get a federally insured HECM reverse mortgage, the biggest initial cost is the Upfront Mortgage Insurance Premium (UFMIP). This is a one-time fee of 2% of either the maximum lending limit ($1,249,125) or your home’s appraised value, whichever is lower.

There’s also an ongoing cost called the Annual Mortgage Insurance Premium (MIP). This is 0.5% of your remaining loan balance and is added to your loan each month.

Mortgage insurance on a reverse mortgage has important benefits. It ensures you will never owe more than your home is worth, even if your loan balance exceeds your home’s value. This protection is called the “non-recourse feature.”

With reverse mortgage insurance, you can be sure that your money, whether as a lump sum, monthly payments, or a line of credit, will always be available to you. This is true no matter how long you live or if your lender goes out of business. The insurance ensures the lender cannot cancel, reduce, or freeze your line of credit.

Understanding these costs and benefits can help you decide if a reverse mortgage is right for you. It protects you, your heirs, and the lenders, making the reverse mortgage program safe and reliable.

Table of Contents

• Introduction to Reverse Mortgage Insurance

• Benefits of Reverse Mortgage Insurance

• Non-Recourse Protection Explained

• Guaranteed Access to Loan Funds

• Understanding the Upfront Mortgage Insurance Premium (UFMIP)

• Annual Mortgage Insurance Premium (MIP) Explained

• Weighing the Costs vs. Benefits of Reverse Mortgage Insurance

• Reverse Mortgage Insurance Requirements by Loan Type

• Frequently Asked Questions About Reverse Mortgage Insurance

Benefits of Reverse Mortgage Insurance

Reverse mortgage insurance provides essential protections that are particularly valuable for borrowers of reverse mortgages, more so than for those with other types of home loans, such as FHA or conventional loans requiring private mortgage insurance.

One of the standout features of reverse mortgage insurance is the “non-recourse feature.” This means if the loan amount exceeds the value of your home when it’s time to pay the loan back, neither you nor your heirs will be responsible for paying the excess amount. You or your heirs will never owe more than the home is worth, providing significant peace of mind.

Non-Recourse Protection Explained

In a reverse mortgage, unlike a regular mortgage, you are not required to make any monthly payments as long as you live in your home. Because of this, the loan balance can grow over time.

Imagine, after many years, that the amount you owe from the reverse mortgage could end up being more than the current value of your home, especially if no payments have been made to reduce the loan balance. This situation is where the non-recourse protection comes in: it ensures that you or your heirs will never have to pay more than the house is worth, no matter how much the loan balance has grown.

Guaranteed Access to Loan Funds

With a reverse mortgage, you can choose how to receive your money: as a one-time lump sum, in regular monthly payments, or through a line of credit that you can tap into as needed. Reverse mortgage insurance ensures that these funds will be available to you exactly as agreed in the terms of your loan.

This guarantee is particularly important because it still holds even if your lender goes out of business. For borrowers who opt to receive their funds over time, such as through monthly payments or a line of credit, this protection is invaluable. Unlike some traditional banking products, your reverse mortgage line of credit cannot be canceled, reduced, or frozen by the lender, ensuring consistent access to your funds.

Understanding the Upfront Mortgage Insurance Premium (UFMIP)

When you take out a reverse mortgage, one of the first closing costs you’ll encounter is the Upfront Mortgage Insurance Premium or UFMIP. This one-time fee amounts to 2% of either the maximum lending limit, which is currently $1,249,125, or the appraised value of your home, whichever is lower. This fee helps protect the lender and ensures the terms of your loan are guaranteed by the federal government.

Annual Mortgage Insurance Premium (MIP) Explained

With a reverse mortgage, there is an ongoing cost known as the Mortgage Insurance Premium or MIP. This fee is 0.5% of the remaining loan balance and is added to your loan amount each month. However, you don’t have to pay this fee until the entire loan is paid off.

While mortgage insurance in traditional mortgages mainly protects the lender if a borrower fails to make payments, in a reverse mortgage, this insurance offers significant benefits for you, the borrower. It ensures that you will never owe more than your home is worth when the loan is due, even if the loan balance grows larger than the home’s market value.

Weighing the Costs vs. Benefits of Reverse Mortgage Insurance

When thinking about a reverse mortgage, it’s crucial to consider how mortgage insurance impacts the process. This insurance protects you as the borrower and the lender, your heirs, and the investors who may purchase securities backed by these loans. This insurance makes the reverse mortgage program feasible and safe for all involved.

Understanding this can help you evaluate whether the benefits of a reverse mortgage, such as no required monthly payments and protected access to funds, outweigh the costs associated with the insurance premiums.

Reverse Mortgage Insurance Requirements by Loan Type

Type of Mortgage	Description	Conditions for Mortgage Insurance	Upfront MIP	Ongoing MIP
HUD Reverse Mortgage	Federal Housing Administration insured loan.	Required for all loans.	Yes	Yes
Proprietary Reverse Mortgage	Proprietary and Jumbo reverse mortgages carry no insurance premiums	Never	No	No
USDA Loan	United States Department of Agriculture loan for rural homebuyers.	Required for all loans.	Yes	Yes
Conventional Loan	Standard home mortgage not insured by a government agency.	Typically if down payment is less than 20%.	Varies	Yes, if down payment < 20%
VA Loan	Department of Veterans Affairs loan for service members and veterans.	Funding fee required, no monthly MIP.	Yes (Funding Fee)	No

This table outlines the conditions, upfront, and ongoing requirements for mortgage insurance associated with FHA, Proprietary/Jumbo reverse mortgages, USDA loans, conventional loans, and VA loans.

Want to See Your Costs and Benefits? Get a custom reverse mortgage quote with insurance details from All Reverse Mortgage, Inc. (ARLO™) — America’s #1 Rated Lender with a 4.99/5-star rating! Call (800) 565-1722 or click here for your free quote — simple, trusted, 100% secure!

Frequently Asked Questions About Reverse Mortgage Insurance

Why is there mortgage insurance on a reverse mortgage?

Mortgage insurance is required on a reverse mortgage to protect you and the lender. This insurance guarantees that you will never owe more than your home’s value. If your loan balance becomes higher than your home’s value, the insurance will cover the difference.

Who insures reverse mortgages?

The Federal Government insures the HECM reverse mortgage program through the FHA.

Do all reverse mortgage loans require mortgage insurance?

No. The HECM reverse mortgage program has mortgage insurance, but there are Non-FHA programs without mortgage insurance.

How much is the mortgage insurance premium?

The initial mortgage insurance premium for the HECM program is 2% of the property value or max claim (whichever is less). The current max claim is $1,249,125. The annual renewal is 0.50% of the loan’s outstanding balance.

What does UFMIP stand for?

UFMIP stands for Up-Front Mortgage Insurance Premium.

If I refinance my reverse mortgage to a new reverse mortgage, do I have to pay the full 2% mortgage insurance again?

Not the first time you refinance, but it may change if you refinance more than once. The first refinance uses 2% of the property value or the HUD maximum lending limit, whichever is less. Subsequent refinances use a formula that gives credit for previous UFMIP payments.

Does mortgage insurance premium cost differ between reverse and forward mortgages?

Yes. Reverse mortgage insurance is higher because it represents a greater risk to HUD. There is no mandatory repayment date, and the loan balance grows over time. The premiums help keep the insurance fund solvent.

Can reverse mortgage insurance be reduced or eliminated if the value of your home appreciates?

No. A reverse mortgage is a non-recourse loan, meaning the lender cannot seek repayment beyond the property’s value, regardless of the loan balance.

Does reverse mortgage insurance cover any shortfalls if the home is sold for less than its value?

Yes. The insurance covers any shortfall if the home sells for less than the loan balance.

Does the mortgage insurance settle the loan upon the borrower’s death?

No. Mortgage insurance covers losses lenders might incur, not the loan itself upon death. That function is characteristic of life insurance.

Does the mortgage insurance rate remain constant for the duration of the loan, or can this percentage increase?

The rate remains constant at 0.5% of the loan’s outstanding balance. However, as your loan balance increases, the amount you accrue each month will also increase, even though the percentage stays the same.

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Post your question in the comments below and anticipate a personalized response from Mr. Branson himself, typically within one business day. He's here to illuminate all angles of reverse mortgages, ensuring you're equipped with the knowledge to make informed decisions. Take this opportunity to gain insights from a seasoned professional.

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36 Comments on this Article

Vao S.
April 17th, 2025

My home has had a reverse mortgage for over 30 years. My husband passed away, and I now hold sole ownership. My problem is that my homeowner's insurance company is warning me of non-renewal unless I complete some repairs. I've already spent nearly $2,000 on repairs, but they're still asking for more. I need to know how hard it is to find homeowner's insurance for a reverse mortgage property because I only have a couple of weeks before they drop me.
Reply to Vao
- Michael Branson
  April 20th, 2025
  
  Hello Vao,
  This is a very timely issue that many homeowners are facing - especially those with mortgages. All home loans, not just reverse mortgages, require borrowers to maintain homeowner's insurance. That's because lenders need to ensure that if a fire or other disaster occurs, they're not left with no collateral securing the loan.
  Unfortunately, in many parts of the country, maintaining coverage has become increasingly difficult due to rising premiums and stricter underwriting standards. So, what should you do?
  The best option is usually to keep your home insured through a traditional insurance company at the lowest available rate. I understand you've already invested money to meet their repair requirements, and now they're asking for more. But you'll want to weigh the cost of completing those additional repairs against the much higher premiums you could face if they cancel your policy and you're forced to use a last-resort insurance provider, such as the California FAIR Plan. (Although not government-provided, this type of coverage is backed by a consortium of private insurers and overseen by a board that includes the state insurance commissioner.)
  While plans like these can provide the coverage needed to meet lender requirements, they're typically much more expensive and offer limited coverage. So, if the required repairs are a one-time, manageable expense, you're likely better off completing them to preserve your current policy.
  If you have time, it's a good idea to shop around with other insurance companies to see if any have less restrictive requirements. With only a couple of weeks, time is limited, but try reaching out to family, friends, or neighbors for recommendations on good local agents. A knowledgeable agent who moves quickly and communicates honestly can help you assess your real options. You may find that your current company is actually the most difficult to work with - and a change could benefit you. Or, you might find they're the best fit, and making the repairs is the right move. A trusted agent might even be able to refer you to affordable contractors for any required work.
  If you're active in your church or community groups, you might also look into local assistance programs. There are also HUD and nonprofit repair assistance programs, though with your short timeline, they may not move fast enough - but they're worth exploring if you anticipate future repairs will be needed to keep coverage intact.
  Bottom line: If you have a home with any kind of loan, including a reverse mortgage, you are required to maintain homeowner's insurance. That's a key consideration for any borrower. In your case, the immediate goal is to avoid cancellation and keep your current coverage in place so the lender doesn't call the loan due. Once that's secured, you can focus on long-term solutions to keep your coverage affordable.
  Reply to Michael
Christine
June 21st, 2024

I have a reverse mortgage and the lender carries/charges monthly for mortgage insurance. They are also requiring me to have a mortgage insurance policy. This is totaling around $500 a month. Is this a normal requirement?
Reply to Christine
- Michael Branson
  June 22nd, 2024
  
  Hello Christine,
  If you have the HUD HECM loan, it is an FHA-insured loan and they all have a mortgage insurance requirement. Depending on when your loan closed. It may have been at a time when the requirement was 1.25% of the outstanding loan amount instead of the .50% that it is today.
  You may want to look into a refinance if it is beneficial to you as the initial cost for Up-Front Mortgage Insurance Premium would be much less if this is your first refinance and you may benefit from the availability of additional funds but be sure it is a good deal for you before you do anything. The lender will perform a test to be certain you meet HUD's requirements to do a refinance but you need to be sure that it also will achieve your desired goals.
  Reply to Michael
Yvonne T.
May 24th, 2024

What a great article and Q & A thread. I learned a lot of information.
Here is my question: I have a reverse mortgage (HECM) and have had it for over ten years. We have been getting a phone call from a lady who says she is in the HECM servicing dept and that we need to call her right away as we have been overpaying our MIP. She mentioned she also sent us a letter, which we never received or I threw out. We have not responded back as I think it is a sales call - would I be right? Thank you for your advice.
Reply to Yvonne
- Michael Branson
  June 2nd, 2024
  
  Hello Yvonne,
  Did she mention the company name of the servicing department and use your loan number, or did she just use the generic term "servicing department"? This could be a phishing call, and she may be trying to sell you something. If so, it is not a very ethical way to start a conversation. If she is with your lender or with a company that services your loan, she should properly identify herself and give you adequate information to confirm that she is servicing your loan either as your lender or as a company contracted by your lender. I suspect that she is not an employee of or authorized by your lender to contact you about your current loan, which means she is likely trying to get you to refinance your current loan.
  Now, that may not be a terrible thing. If you got your loan at a time when HUD charged 1.25% for renewal fees, the current renewals are 0.50% for loans closed today. You may be able to get more money on a refinance as well, but my advice to you is not to jump at the first offer. Get a few proposals and compare them. If a refinance will be beneficial for you, it never hurts to find out if the offer this person is making is the best one available. Sometimes you can do much better by comparing different lenders. Lowering the mortgage insurance on your loan may not be the best option for you if better terms are available now, and the only way to know for sure is to shop and compare.
  One easy way to do that is to visit online calculators like the one on our site. Because HUD allows borrowers credits on the initial mortgage insurance based on the amount they paid on their last loan, calculators can't always be totally accurate for refinance transactions for upfront fees because they need to know what you paid on your last reverse mortgage. So, don't be afraid to talk to some originators so they can give you an accurate quote. If you speak to a good company like ours, we will be happy to give you the numbers without any pressure and without requiring you to provide your social security number or other personal information (other than birthdates, which are needed to determine your benefits). Then you can decide if a refinance is best for you.
  Reply to Michael
Richard T.
March 31st, 2024

Does the home hazard insurance require earthquake coverage?
Reply to Richard
- Michael Branson
  April 5th, 2024
  
  Hello Richard,
  While earthquake coverage might be advisable, it is not required by HUD. You need to determine if you need or want the coverage.
  Reply to Michael
Sloan
June 11th, 2023

Hi ARLO,
Your article stated "2% UFMIP" for the original reverse mortgage. Then, for the first refinance, your calculation is New Max Claim - Original Max Claim x 3%. How did you come up with 3% versus 2%? I'm applying for a second refinance, and I'm unsure which to use - 2% or 3% - to verify my UFMIP. I took a credit on the first refinance.
Thank you!
P.S. Your website is tremendously resourceful!
Reply to Sloan
- Michael Branson
  June 20th, 2023
  
  Hello Sloan,
  Your Up-Front Mortgage Insurance Premium (UFMIP) for the first time you close a reverse mortgage on your home is 2% of the property value or the HUD maximum lending limit, whichever is less. Your second and subsequent loans use a formula that we will go into below to determine how much you will pay that takes into consideration how much UFMIP you paid on the reverse mortgage you closed just before the one you are closing at that time and then give you credit for UFMIP paid on the prior loan. The first time you refinance a HECM with a new HECM loan, HUD will give you credit for the UFMIP you paid on your first loan. This credit is usually large enough so that the first refinance for most borrowers allows them to pay very little to no UFMIP on that first refinance. HUD will only give you credit for any UFMIP you paid on the loan you closed just before each time you refinance. What this means is that if you refinance the loan a second time (which would be your third reverse mortgage on the same property), when you look back to determine how much UFMIP credit you will receive based on what was paid on the prior loan, there is often no credit available because borrowers often pay very little or no UFMIP on their previous transaction on the refinance. If the loan limits, rates, and values were to make it feasible for a 4th transaction, whatever UFMIP paid by the borrower on the third transaction would be available for credit on that fourth transaction (looking back at the previous transaction where the borrower did pay UFMIP).
  So, for example, when you got your first reverse mortgage, let's say you paid 2% based on the property value or the HUD maximum claim amount. If you did the loan in 2016 at the maximum claim amount at the time of $636,150, the amount of UFMIP you would have had to pay would be $12,723. But let's assume you were in an area where your home experienced strong appreciation after 2016. Since it increased in value considerably after 2016, you decided to refinance in 2020 when the HECM max lending limit was $822,375 (and for argument's sake, let's say your home was then valued at $822,375 as well). The refinance rule was that you would pay 3% of the difference of the UFMIP based on the value or maximum claim amount, which would be $186,225. When you multiply that by 3% or .03, it equals $5,586.75. In our example, since you paid $12,723 on the last loan, the credit HUD allows for the first payment was higher than the new premium, so you would owe no UFMIP on this refinance.
  The UFMIP would be calculated the same way for any new refinances, but the credit for UFMIP already paid changes on subsequent refinances because it only considers the UFMIP you paid on the immediately preceding loan. Continuing our example, let's assume that your home is now worth $1,100,000 (over the current HUD maximum lending limit of $1,089,300, but the numbers are based on the HUD maximum or the property value, whichever is less). Your new maximum will be based on the HUD maximum lending limit, and the difference in value between your refinance in 2020 and today is $266,925 ($1,098,300 minus $822,375 = $266,925) when you multiply that by 3% or .03, that totals $8,007.75. This would be the amount due for UFMIP on this refinances.
  This is one of the reasons lenders need help quoting accurate UFMIP costs to borrowers when first speaking to them about reverse mortgage refinances. If the Loan Officer has all the information about prior loans and fees paid, they can know what HUD will charge once they receive it, including how many times the loan has been refinanced, what fees were paid, etc.
  Reply to Michael
David C.
May 11th, 2023

My father has a reverse mortgage and is 96. Does his insurance no longer have to pay because of the age clause?
Reply to David
- Michael Branson
  May 15th, 2023
  
  Hello David,
  Unfortunately, fires and other catastrophes can happen regardless of the borrower's age, so there is no such clause in the hazard insurance, and lenders require the home to be covered with hazard insurance for as long as the loan is outstanding. Likewise, the interest on the loan continues to accrue for as long as the loan remains outstanding, which continues to increase the balance and the potential claim to HUD. Therefore, there is no age at which the mortgage insurance ceases.
  Unlike taxes that a county may cease to collect from senior homeowners at some point, insurance premiums, both hazard and mortgage insurance, are collected to mitigate the losses that could be incurred if the insurance company or HUD would be required to pay claims.
  If the tax assessor suspends taxes, they would potentially lose any future revenue. Still, they have no additional liability (they would not be forced to pay any money out as insurance companies and HUD could be required to do). That is why insurance, both hazard and mortgage insurance, are required and premiums paid by borrowers for the life of the loan regardless of the borrower's age.
  Reply to Michael
Jessica
January 18th, 2023

I just wanted to comment and say how much I love this thread of questions and answers. Well done on answering the questions in an easy way for us to understand. Thank you!
Reply to Jessica
- Michael Branson
  January 22nd, 2023
  
  Hi Jessica,
  
  Thank you. We try to help as much as possible.
  Reply to Michael
Cynthia
September 27th, 2022

Hi ARLO,
Will I continue to pay property tax and homeowners insurance at original rates or will these payments be reassessed as well at the origination of a HECLOC? In other words, will I be paying higher property taxes and Homeowners Insurance rates bases on market value?
Reply to Cynthia
- Michael Branson
  September 30th, 2022
  
  Hello Cynthia,
  
  The reverse mortgage is a loan and just like any other loan, it does not trigger a reassessment of the property taxes. Most taxing authorities reassess properties upon change of ownership but depending on the location, your taxing authority may be able to reassess your home just because they feel there has been a change in the value (but not because of the loan). If you have any questions on your taxes, you really should contact your tax assessor to determine under what circumstances they can reassess your home and raise your taxes.
  
  Your insurance is another matter. You will be required to carry sufficient insurance coverage to pay for any covered losses up to the loan amount or the replacement cost of the home if that is less than the loan amount. In other words, if you currently have just $100,000 insurance on your home but if it burns down, it will require $300,000 to rebuild the residence, your lender will require the additional coverage so that if there was a total loss in a fire, you and the lender would be covered. This is one area that we often see that needs revision.
  Borrowers, especially those with no loans on their property for several years, tend not to raise their insurance coverage as their property increases in value and are many times under-insured. It is not uncommon for us to see borrowers with insurance coverage for only a portion of what it would take to rebuild their home if they were to ever have a devastating fire or other disaster.
  For this part of your question, I would tell you that if your coverage is for much less than your home's value, there is a chance that you might need to raise it to get any loan including a reverse mortgage. How much that would cost would be between you and your chose insurance company.
  Reply to Michael
Adrienne
March 24th, 2022

Hello Arlo,
I have an existing Reverse Mortgage that is changing over to a new lender. This lender has sent me a list of fees, i.e., occupancy inspection fee, preservation inspection fee, repair inspection fee, which fees can cost me up to $5,000 each. I have never received anything before like this lender. I have not defaulted on any of my terms. Who can I speak to, to find out if this is legitimate and what I can do?
Reply to Adrienne
- Michael Branson
  March 29th, 2022
  
  Hello Adrienne,
  
  I have never heard of such fees and in these amounts before for inspections. I would contact the lender directly and request an explanation of these fees before you do anything. If you are not happy with their explanations, then contact HUD if you do not feel you are getting a legitimate answer.
  They may be giving you fees that could be charged under certain circumstances and based on issues they uncover or there may be some other misunderstanding but if they are telling you that they are just going to start charging you these fees at this time, I would not agree that these are reasonable fees and would recommend that you contact an attorney, possibly the Consumer Financial Protection Bureau, AARP as they help seniors and the National Reverse Mortgage Lenders Association to ask for their assistance. I do not believe there are any places in your original documents that state a lender can charge you fees for inspections in these amounts.
  
  Lenders can charge reasonable fees for services performed and I think if they are telling you that if they need to do something to preserve the property those costs might run higher based on the work needing to be done, that might be just a misunderstanding. And typically, I would think that the new lender is only letting you know that there are different inspections that may be required based on certain circumstances but those would not even be needed in all cases.
  But an inspection is not something that costs the lender a lot of money so I would be very surprised if the inspections alone are what they are saying is what could cost this much and I really think you should contact them first to discuss. You can always decide if you need to take further action later if you do not get the answers to all your questions.
  Reply to Michael
Norman C.
January 11th, 2022

Hi Arlo,
On my reverse mortgage I did not take out any funds. Why am I still paying a MIP? My line of credit was and is at a $0 balance.
Reply to Norman
- Michael Branson
  January 11th, 2022
  
  Hello Norman,
  
  The initial balance starts with any fees you pay to get the loan plus any amounts needed to pay off any existing loans or liens on the property at that time. You cannot even have a zero balance with a verse mortgage as the loan cannot remain open with a zero balance.
  There are two times you pay mortgage insurance on a reverse mortgage. There is the upfront premium and the annual renewal. The up front premium is what is combined with any other initial loan that total the balance owed that you see on your statements and is the balance that is the basis upon which the mortgage insurance is accruing if you had no mortgages to pay off.
  
  You can pay down the balance of the fees you started with at any time if you wish but remember, you cannot pay them down to zero or the loan would be closed. The interest and mortgage insurance accrual on a modest balance of $500 or $1,000 balance would be very minimal and well worth keeping the loan active if you want the loan to stay open for the future.
  Reply to Michael
Russell H.
September 12th, 2021

Our house was not habitable because of hurricane ida, what happens to our reverse mortgage if we cannot live in our house anymore?
Reply to Russell
- Michael Branson
  September 22nd, 2021
  
  Hello Russell,
  
  Just as with any loan, your insurance would pay its claim payment to both you and the lender. The claim would hopefully be used to make the needed repairs to make the property habitable once again. In some instances, the property may never be habitable again. This is especially true with the land itself undergoes some catastrophe that renders it unbuildable such as a sink hole, landslides, earthquakes, etc.
  If it just takes longer to rebuild, your lender and HUD will work with you to get you back into your home. If the home can never be rebuilt due to the nature of the damages, the insurance proceeds would be first applied to pay off the loan balance and any remaining funds (along with the property) would be yours to use as you see best.
  Reply to Michael
Donald R.
April 13th, 2021

My question concerns MIP and the available credit line. I had problems with the lender without my consent or event knowledge withdrawing funds from my credit line to pay insurance or taxes which were not due. To stop this, I withdrew all but $100 from my credit line.
Since March of 2020, while I have taken no new advances, my available credit has been decreasing by about $10 a month, until this month there is zero available credit. The bank's explanation is that the theoretical increased in my credit line (the interest rate plus .5% MIP insurance) is not sufficient to pay the .5% MIP fee, and so my credit line has been decreasing rather than increasing because I am paying the MIP. This makes no sense to me. And what is the impact of there being no funds available to pay the MIP?
Reply to Donald
- Michael Branson
  April 14th, 2021
  
  Hello Donald,
  The lender is required to be able to give you an accounting of the funds and an amortization schedule for the amount you use and the interest you accrue.
  The Mortgage Insurance that accrues on the unpaid principal balance is simply added to the amount you owe, it is not subtracted from the line of credit available to you so I can't imagine what they are saying and they are not allowed to simply give you a "gee I think it's this..." type answer, they need to be able to give you an accounting along with a monthly schedule to show you any amounts you received, interest accrued, payments made on your behalf and any charges they charged you for services they rendered.
  You should also have seen all of this in your last 12- or 13-month's statements. I see that you said they paid insurance and taxes you claimed were not yet due. You should have investigated that fully with the lender immediately as unless you are on a program whereby, they pay these assessments for you, they cannot simply pay them as they choose if they are not yet due.
  My guess is that there may be a payment that was missed that you are not considering that has put you in a position that caused the lender to start making payments when that one payment was not caught up without their intervention and that there may be other costs involved with their actions but that is just a guess.
  The only way you are going to know for sure is to get an accounting of all payments made and any assessments to you if you do not have all your monthly statements going back to the time before the lender first started making payments of taxes and insurance. I have no way to know for sure what is happening, but I can tell you that it is most likely nothing to do with the mortgage insurance premium (MIP).
  The MIP will continue to accrue and will continue to be added to the outstanding balance from this point forward. If you look at your initial paperwork, the amortization schedule will show you the MIP accrual that is added to your balance monthly and it does not lower the line of credit or increase it either way.
  Reply to Michael
Gloria
April 27th, 2020

Hello ARLO,
Thank you for your comprehensive replies to questions.
Have one of my own; did a HUD reverse mortgage for my father in 2016 at a non-fixed interest rate. The rate has gone up and with the Feds lowering the rate to below zero, why would it increase? Is this just arbitrary?
Thank you,
Gloria
Reply to Gloria
- Michael Branson
  April 27th, 2020
  
  Hello Gloria,
  
  The rate moves based on the terms of the loan and based on the index set up at inception. If the loan is a one-year adjustable rate loan, the interest will change annually. A monthly adjustable rate will change monthly.
  But the index on which the loan interest rate is based was set up at the time the loan was closed. That could have been a few different things but in 2016 that rate was probably the LIBOR or London Inter Bank Offered Rate.
  I tried checking to see what the most widely used index for adjustable rate reverse mortgages in 2016 was because my memory serves that most loans we originated and all that I remember seeing offered were LIBOR but I am unable to find any printed information to verify.
  However, the rate for your father's loan is based on an index that is probably the LIBOR (or possibly a Constant Maturity Treasury or CMT) that is not at 0% as is the Fed Fund Rate. I am not aware of any loans that use the Fed Funds rate as their index.
  
  But something you should know, if your father has the LIBOR index it will soon be replaced with a new index as the LIBOR is expected to go away in 2021. If your father's loan is currently utilizing the LIBOR for its index, under the terms of the legal documents, if the index is no longer available the lender would be forced to choose a new index.
  If you would like further information about the fate of the LIBOR and what will happen after it is gone, the Consumer Financial Protection Bureau (CFPB) has a good article about it on their website at https://www.consumerfinance.gov/about-us/blog/libor-going-away-heres-what-you-need-know-about-libor-and-adjustable-rate-loans/ where you can read all about it.
  Reply to Michael
Cliff M.
April 8th, 2019

My home will be sold "as is" for less than the loan balance. Will the FHA insurance pay the difference without questioning the low selling price? Will the family simply pay the mortgage holder the sale price and they (mortgage holder) files the insurance claim for the balance?
Reply to Cliff
- Michael Branson
  April 8th, 2019
  
  Hello Clif,
  
  You can't sell a home for less than the amount owed on the loan without lender approval. If you do not get the approval from the lender in advance, your sale will not close if they do not agree to accept a payoff for less than what is owed as payment in full for the debt.
  The lender must have HUD approval if they are going to authorize any loss on which HUD will have to pay a claim. In order to authorize the sale of the property for less than what is owed on the loan (commonly referred to as a "short sale"), HUD will require the lender to obtain an appraisal on the property. If they agree that the price for which the home is being sold is the market price and that if they foreclosed on the loan they would only turn around and sell it at the same or similar price, they will approve the sale and then HUD would pay the claim for the loss.
  
  So, when you ask me will they pay the claim without questioning the low price, that answer is definitely no. There will be a lot of research to determine that the sale is an arm's length transaction and that HUD is not paying a claim that is higher than they would pay if they required the lender to foreclose and sell the property themselves.
  Reply to Michael
  - MARIA N.
    May 17th, 2020
    
    Hi Arlo, so are you saying that for instance, my dad is 91 now. My husband and I moved in with him because he could not keep up the house on his own. He has used up all the money from the reverse mortgage, so my husband and I use our own money to do repairs and such. If we wanted to purchase the house through a quick sale and they do an appraisal, if the appraisal comes back less then what is owed, for instance, if the balanced owed is $100,000 and the appraisal comes back for $80,000 is the house sold to me at $80,000 and the insurance covers the rest of the $20,000 owed by my dad?
    When the person dies, and the family gets the chance to buy does it work the same as above?
    Reply to MARIA
    - Michael Branson
      May 18th, 2020
      
      Hi Maria,
      The heirs can pay off the loan at 95% of the current market value. So, if the home is valued at $80,000, the heirs would be able to pay off the loan at $76,000, not $80,000 after the borrower passes. The family does not "buy" the home as the home still belongs to dad's estate at that point, not the lender.
      You would just need to clear the title with the probate court and any other heirs and then let the lender know that you want to exercise the option to repay the loan at 95% of the current market value or the amount owed, whichever is less.
      Reply to Michael
tony fedrizzi
July 15th, 2018

What is a mortgage payee clause? Does this clause have be part of the insurance policy?
Reply to tony
- Michael Branson
  July 16th, 2018
  
  Hi Tony,
  The Mortgagee's Loss Payee Clause is the clause that states that the mortgage loan holder is also a loss payee under the insurance policy. It is included in all loans, not just reverse mortgages. All Lenders require them any time a borrower obtains a loan in order to protect the lender's interest in the property as well as the borrower's.
  Without the Lender's Loss Payee clause, if a borrower suffered a loss (total or otherwise) from fire or other causes, a borrower could take the insurance payment and walk away without ever rebuilding the improvements and the lender could be left with a loan on a worthless piece of property.
  Therefore, they have the loss payee clause which requires the insurance company to make all checks out to the lender and the borrower and the lender will not sign off on the check until the property is repaired at times of damage.
  Reply to Michael
ronald r phillips
September 11th, 2015

if I choose a 10 year payment on a reverse mortgage do I pay a monthly fha insurance premium or does the lender pay it and add it to my loan
Reply to ronald
- Michael Branson
  December 8th, 2015
  
  Hi Ronald,
  
  The MIP renewal accrues on the outstanding balance. Both the interest that accrues and the MIP that accrues are added to the balance and each are paid when the loan is paid off. This way, if you choose to pay off the loan earlier than the 10-year term, you would only pay the amount that you actually accrued and there is never a prepayment penalty on your reverse mortgage.
  Reply to Michael
  - Ric McCleary
    March 20th, 2018
    
    following on that line of query - is the MIP based on the total value of the loan - even if it is a line of credit that is never used?
    Reply to Ric
    - Michael Branson
      March 20th, 2018
      
      Hi Ric,
      The initial Mortgage Insurance Premium is determined by the lesser of the home's value or the HUD maximum Lending Limit. Each year thereafter, the renewal is based on the outstanding balance of the loan.
      Therefore, the initial premium is based on the value of the home regardless of whether you ever use the line or not but every year thereafter, the lower the balance is, the lower the renewal premium will be (it's .5% of the outstanding balance).
      Reply to Michael

Calculate Your Reverse Mortgage

America's #1 Rated Reverse Mortgage Lender*

Reverse Mortgage Insurance — UFMIP & MIP Costs Explained

Introduction to Reverse Mortgage Insurance

Benefits of Reverse Mortgage Insurance

Non-Recourse Protection Explained

Guaranteed Access to Loan Funds

Understanding the Upfront Mortgage Insurance Premium (UFMIP)

Annual Mortgage Insurance Premium (MIP) Explained

Weighing the Costs vs. Benefits of Reverse Mortgage Insurance

Reverse Mortgage Insurance Requirements by Loan Type

Frequently Asked Questions About Reverse Mortgage Insurance

Why is there mortgage insurance on a reverse mortgage?

Who insures reverse mortgages?

Do all reverse mortgage loans require mortgage insurance?

How much is the mortgage insurance premium?

What does UFMIP stand for?

If I refinance my reverse mortgage to a new reverse mortgage, do I have to pay the full 2% mortgage insurance again?

Does mortgage insurance premium cost differ between reverse and forward mortgages?

Can reverse mortgage insurance be reduced or eliminated if the value of your home appreciates?

Does reverse mortgage insurance cover any shortfalls if the home is sold for less than its value?

Does the mortgage insurance settle the loan upon the borrower’s death?

Does the mortgage insurance rate remain constant for the duration of the loan, or can this percentage increase?

Have a Question About Reverse Mortgages?

Over 2000 of your questions answered by ARLO™
Ask your question now!

Leave a Reply to This Article

Calculate Your Reverse Mortgage

America's #1 Rated Reverse Mortgage Lender*

Introduction to Reverse Mortgage Insurance

Benefits of Reverse Mortgage Insurance

Non-Recourse Protection Explained

Guaranteed Access to Loan Funds

Understanding the Upfront Mortgage Insurance Premium (UFMIP)

Annual Mortgage Insurance Premium (MIP) Explained

Weighing the Costs vs. Benefits of Reverse Mortgage Insurance

Reverse Mortgage Insurance Requirements by Loan Type

Frequently Asked Questions About Reverse Mortgage Insurance

Why is there mortgage insurance on a reverse mortgage?

Who insures reverse mortgages?

Do all reverse mortgage loans require mortgage insurance?

How much is the mortgage insurance premium?

What does UFMIP stand for?

If I refinance my reverse mortgage to a new reverse mortgage, do I have to pay the full 2% mortgage insurance again?

Does mortgage insurance premium cost differ between reverse and forward mortgages?

Can reverse mortgage insurance be reduced or eliminated if the value of your home appreciates?

Does reverse mortgage insurance cover any shortfalls if the home is sold for less than its value?

Does the mortgage insurance settle the loan upon the borrower’s death?

Does the mortgage insurance rate remain constant for the duration of the loan, or can this percentage increase?

Have a Question About Reverse Mortgages?

Over 2000 of your questions answered by ARLO™ Ask your question now!

Leave a Reply to This Article

Over 2000 of your questions answered by ARLO™
Ask your question now!