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Reverse mortgage guide
A reverse mortgage has upfront costs (an origination fee, FHA's upfront mortgage insurance on a HECM, and third-party closing costs) and ongoing costs (interest and annual mortgage insurance that are added to your balance). Most upfront costs can be paid from the loan instead of out of pocket, but that still adds to what you owe. As a short-term loan it's expensive, and over many years those upfront costs get spread out. HUD caps the HECM origination fee, and the site shows current mortgage insurance and fee figures from our reference data. Below is every cost, what it pays for, and how to keep it down.
I'll be straight with you: as a short-term loan, a reverse mortgage is expensive. Used over many years, those upfront costs get spread out, and for a lot of people the tradeoff is worth it.
Either way, you should know exactly what you're paying. This page goes through every cost on a reverse mortgage, line by line, the way I'd walk you through a quote across the kitchen table.
This is the fee the lender and broker charge for setting up the loan. On a HECM, HUD caps it:
Your maximum claim amount is the lesser of your home's appraised value or the HECM lending limit (or the purchase price, if you're buying). See Lending Limits.
Lenders can charge less than the cap, and often do. A slightly higher rate can sometimes bring a lender credit that lowers the origination fee or covers it. More on that tradeoff below.
On a HECM, FHA charges an upfront mortgage insurance premium based on your maximum claim amount. It's usually the largest single upfront cost on the loan. The current figure is shown on this page from our reference data.
People ask me all the time, "What am I getting for that?" It's a fair question. Here's what the insurance pays for:
It's not cheap. But it's not money for nothing, either.
These are the same kinds of costs you'd see on any mortgage. They go to the companies doing the work, not to us.
Third-party costs vary a lot by state and county. Your Loan Estimate lists each one.
Before any HECM, you meet with an independent, HUD-approved counselor. Some agencies charge a fee, which can often be paid at closing, and an agency can't turn you away because you can't afford it. Ask the agency before you schedule. See Reverse Mortgage Counseling.
Some items aren't fees, but they reduce what you can use.
If you still owe on your home, that mortgage is paid off at closing from the reverse mortgage. It's not a cost, but it uses part of your available money. People are sometimes surprised by this, so I always show it as its own line.
If the appraiser calls for repairs that can be done after closing, the lender holds back money from the loan to pay for them, usually with a cushion on top. Any amount not used generally goes back to your available funds.
If the financial assessment shows you might struggle to pay property taxes and insurance, the lender may require a LESA. Part of your loan is set aside to pay those bills for you. It lowers the money available for other things, but interest builds only as LESA funds are actually paid out. Most of the people I work with don't need one, because we work hard with borrowers to explain credit problems and extenuating circumstances the right way.
Interest is added to your balance each month instead of billed to you. Because you're not making payments, it compounds: next month's interest is figured on a slightly bigger balance.
Here's the good part. You only pay interest on money you've actually received. If you set up a line of credit and leave most of it alone, you're not paying interest on what you haven't drawn. See today's reverse mortgage rates.
On a HECM, FHA charges annual mortgage insurance on your outstanding balance, added monthly along with interest. Like interest, it's charged only on the money you've drawn. The current figure is shown on this page from our reference data.
HUD allows a monthly servicing fee on a HECM. ZYNG chooses not to charge one on our HECMs. Some proprietary (jumbo) programs do charge a servicing fee, so if a quote includes one, I'll point it out and show you what it adds over time.
These aren't loan costs, but they're the ones that matter most. There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. That includes HOA dues and flood insurance where they apply.
Most upfront costs, including the origination fee, the upfront mortgage insurance, and third-party closing costs, can be paid from the loan itself. So for many people, the only out-of-pocket cost is the appraisal, and sometimes the counseling fee.
That's convenient. But "paid from the loan" doesn't mean free. Financed costs become part of your balance, and they build interest and mortgage insurance from day one. I always show you both numbers: what you'd bring to closing, and what the costs add to your balance.
This is where shopping actually matters.
On an adjustable HECM, the lender sets a margin. A lower margin usually comes with higher upfront costs. A higher margin can sometimes come with a lender credit that lowers or covers the origination fee and some closing costs. It works a lot like buying down the rate on a regular mortgage.
Which is better depends on what you're doing:
On a fixed-rate HECM, the same idea applies to the fixed rate itself. See Comparing Fixed and Adjustable Reverse Mortgages.
Proprietary (jumbo) reverse mortgages don't follow HECM pricing rules.
The programs we compare today include Mutual of Omaha Secure Equity, Finance of America HomeSafe, Longbridge Platinum, Smartfi Choice, Nationwide Equities EquityPower, and MCM Holdings MCM Edge. On a home near or above the HECM limit, I'll price a HECM and a jumbo side by side, because the cheaper option isn't always the one you'd guess.
If you already have a HECM and your home has gone up in value, or the limit has gone up, a refinance can open up more money. You'll pay closing costs again. But on the upfront mortgage insurance, you generally get credit for the premium you already paid on your old HECM.
HUD also has a test to make sure the refinance is worth it to you, comparing the new money available with the closing costs. See Reverse Mortgage Refinance.
There's no one answer, and I won't pretend there is. Here's how I think about it:
The fair comparison isn't just "which has the cheapest closing costs." It's "which leaves you in the best spot five, ten, and twenty years from now."
Every reverse mortgage comes with a Total Annual Loan Cost (TALC) disclosure. It folds all the costs into an average yearly rate over different time periods and home value scenarios.
Short time frames always look expensive on a TALC, because the upfront costs are spread over just a couple of years. Long time frames look much better. That's the clearest picture you'll get of why a reverse mortgage is built for staying put. Read What Is the TALC?
When your Loan Estimate arrives, here's what I'd look at:
At closing, the final figures should line up with your estimate. If anything changed, ask why before you sign. I'm happy to go through any estimate with you, even one from another company.
It depends on your home's value, the program, your rate choice, and your state's closing costs. On a HECM, the biggest upfront items are usually the upfront mortgage insurance and the origination fee. Your Loan Estimate lists every cost.
Yes, most upfront costs can be financed into the loan. Many lenders ask you to pay for the appraisal upfront.
Mostly because of FHA's mortgage insurance on a HECM and the origination fee. The insurance buys real protections that a HELOC doesn't have, like non-recourse and a line of credit that can't be frozen.
There are no required monthly mortgage payments. You must continue to pay property taxes and homeowners insurance, maintain the home, and meet the other loan terms. Interest and annual mortgage insurance are added to your balance, not billed to you. ZYNG doesn't charge a monthly servicing fee on HECMs, though HUD allows one.
Generally not until it's actually paid, usually when the loan is paid off. Ask your tax advisor.
Sometimes. They generally skip FHA's mortgage insurance but carry higher rates. On a high-value home, a jumbo can come out ahead. On a modest home, a HECM often does.
The lender and the broker. As your broker, we're paid for finding the loan, structuring it, and getting it closed. It's shown on your Loan Estimate.
Some can, within the limits set by federal disclosure rules. Your final figures should be close to your Loan Estimate. If something changes, I'll tell you why.
The only way to know your real costs is to price your loan. Get My Estimate, start your reverse mortgage review, or call us at 530-888-6000. I'll show you every line, HECM and jumbo, with and without a lender credit.
Related reading: Reverse Mortgage Pros and Cons, How a Reverse Mortgage Works, and Reverse Mortgage Guide.
ZYNG Mortgage, Inc., NMLS #76801. A reverse mortgage has no required monthly mortgage payments and uses your home's equity. Fees, mortgage insurance and other costs can be added to the loan balance, and the balance grows over time as interest is added, so your equity typically decreases. When the loan becomes due, the home may need to be sold, or the loan repaid from other funds. Interest is not tax-deductible until it is paid, in part or in full. You keep title to your home and must keep paying property taxes, homeowners insurance and upkeep, and meet the other loan terms; not doing so can make the loan due and could lead to foreclosure.
This material is not from HUD or FHA and was not approved by HUD or a government agency.
HECM count at the top of this page: HUD data through September 2026 (source, opens in a new tab).
