Reverse Mortgage Costs Explained: What You'll Actually Pay

Understanding what you'll pay for a reverse mortgage helps you compare it fairly to other options and plan ahead. Here's a clear breakdown of the main costs, how they work, and how they compare to a traditional refinance.

Origination Fee (and the Cap)

The lender may charge an origination fee to process the loan. For HECMs, this fee is capped by law. The cap is the greater of $2,500 or 2% of the first $200,000 of your home's value, plus 1% of the value above $200,000, with a maximum of $6,000. So on a $400,000 home, the max origination would be $6,000. This fee can often be financed into the loan so you don't pay it out of pocket at closing.

Upfront MIP (2%)

FHA charges an upfront mortgage insurance premium (MIP) of 2% of the maximum claim amount (effectively the lesser of your home value or the HECM lending limit). This protects you and the lender — and enables the non-recourse feature so you and your heirs never owe more than the home's value. The 2% is typically financed into the loan, so it reduces the net proceeds available to you rather than requiring a check at closing. For the current HECM lending limit, see our post on the 2026 increase.

Ongoing MIP (0.5%)

There's also an annual (ongoing) MIP of 0.5% of the outstanding loan balance. It's not a separate monthly bill you write a check for — it's added to your loan balance over time, so it accrues along with interest. It's part of why the loan balance grows, and it's also part of the rate at which an unused line of credit grows.

Third-Party Costs (Appraisal, Title, Recording)

You'll pay for an appraisal, title search and insurance, recording fees, and other standard closing items — similar to a forward mortgage or refinance. These vary by location and property. A rough range for third-party costs is often in the $2,500–$4,000 ballpark, but your lender will give you an estimate. Many of these can also be financed into the loan.

Interest Rates

HECMs are typically adjustable-rate loans. The rate determines how quickly your loan balance grows (and how quickly an unused line of credit grows). Rates vary by lender and market. There are also fixed-rate HECMs, which usually require taking most or all of the proceeds at closing as a lump sum. Your loan officer can explain the options and current rates.

How Costs Compare to a Traditional Refinance

In structure, reverse mortgage costs are similar to a refinance: origination, insurance (MIP instead of PMI or no PMI), and third-party fees. The big difference is that with a reverse mortgage you're not making monthly principal and interest payments, so the "cost" is often evaluated in terms of reduced proceeds and long-term growth of the balance. For many people, the benefit is eliminating a monthly payment or gaining a growing line of credit — and the costs are part of that tradeoff. Our FAQ has more on costs and how much you can get.

Most Costs Can Be Financed Into the Loan

You generally don't need to bring a large amount of cash to closing. Origination, upfront MIP, and many third-party costs can be financed — that is, added to the loan balance — so your available proceeds are reduced by those amounts, but you don't pay them out of pocket. You'll still need to pay some items that can't be financed (e.g., the appraisal in some cases, or a portion of fees depending on the lender). Your loan estimate will spell this out.

Total Cost Examples at Different Home Values

Rough examples (your numbers will vary): On a $300,000 home, total closing costs might be in the $15,000–$20,000 range (origination, MIP, third party). On a $500,000 home, perhaps $20,000–$28,000. These reduce the net proceeds you receive or leave in a line of credit. The calculator on this site uses assumptions for origination, MIP, and third-party costs so you can see an estimate of net proceeds; it's a good starting point. For a personalized breakdown, reach out and we can go through your scenario.

Knowing the costs helps you decide whether a reverse mortgage fits your goals. Try our calculator to see estimated proceeds for your situation, or contact me for a clear, personalized discussion.