Fees and Costs

There are three primary acquisition costs for a HECM Reverse Mortgage.  However, the only cost that is typically paid out-of-pocket is for HUD counseling and the appraisal.

1. FHA Mortgage Insurance Premium (MIP)

The Mortgage Insurance Premium (MIP) is a fee paid by the borrower to the Federal Housing Administration (FHA), an agency of the federal government, to provide certain protections for both the lender and the borrower in a HECM reverse mortgage.

If the company servicing the loan can no longer meet its obligations, FHA assumes responsibility for the loan, providing the borrower with uninterrupted access to any remaining reverse mortgage proceeds. It also guarantees that you will receive your promised loan advances and will not have  to repay  the loan for as long as you live in the home and meet the requirements of the loan.

In cases where the sale of the home is not enough to pay back the reverse mortgage, the insurance protects the borrower or estate from owing more than the sale price by covering losses incurred by the lender.

  • The MIP paid upfront equals two (2) percent of the home’s appraised value or FHA lending limit,  whichever number is less.
  • You also are charged MIP on an annual basis — 0.5 percent of the outstanding loan balance — however this fee doesn’t come out of your available loan proceeds. Rather, it accrues over time and you pay it once the loan is called due and payable.

2. Origination Fee

The lender is permitted to charge a fee to cover their costs. HUD sets the maximum amount to be calculated at 2 percent of the first $200,000 of the home’s value and 1 percent of any remaining value. The maximum amount that can be charged is $6,000.  Origination fees will vary from lender to lender and vary according to secondary market pricing functions.

3. Third Party, Title and Closing Settlement Fees

This includes costs charged by third-party vendors associated with transacting and closing the loan (see below).  These charges typically range between 0.5 percent to 1 percent of the home’s appraised value (up to the lending limit). Most of these fees (with the exception of the appraisal) can usually be financed into the loan.

  • Appraisal
  • Title insurance (varies by state and with property value)
  • Title settlement
  • Title search/exam
  • Recording
  • Delivery/courier
  • Payoff (if a mortgage is being paid off)
  • Notary
  • Document preparation

Standard Retail Acquisition Costs 2021

The chart above reflects standard retail pricing as of October 2021.  Pricing will vary based on product choice and interest rates at the time of securing the loan.