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Reverse Mortgage Loan Fees

By Daniel Cohen Oct 21, 2012
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Reverse Mortgage Loan Fees and Cost

One of the biggest negatives of a reverse mortgage is the high up front cost.  If you are considering a reverse mortgage, be sure to review all the fees and costs associated with a reverse mortgage quote:

  • Origination Fee
    The origination fee is the fee charged by the lender to cover their operating expenses such as overhead, marketing, etc.  With a HECM loan, the fee charged is 2% of the initial $200,000 home value and 1% of the balance thereafter, with an overall cap of $6,000. For example, a $300,000 home value will be charged $5,000 ($200,000 x 0.02 + $100,000 x 0.01).
  • Monthly Insurance Premium (MIP)
    The monthly insurance premium is a government-required fee for a HECM mortgage.  This fee guarantees that you will receive the reverse mortgage loan proceeds even if your loan provider declares bankruptcy or goes out of business.  It also insures that you will never owe more than your home is worth.  An initial MIP is charged on a HECM reverse mortgage equal to the lesser of 2% of your home’s value or the maximum claim amount.  A monthly MIP is also charged equal to 0.5% of the mortgage loan balance.
  • Loan Servicing Fee (Service Fee Set Aside)
    The loan servicing fee is charged for the services performed by the lender during the life of the loan.  These services include sending account statements, automatic deposits, loan processing, and other ongoing loan servicing needs.  The fee charged by lenders ranges from $30-$35/month.  The total servicing fee over the life of the loan is calculated and projected at the time of closing.   This total cost is deducted from your available loan proceeds and is NOT an out of pocket expense.
  • Counseling Fee
    For a HECM loan, the government requires a consultation with an independent HUD approved counselor.  This mandatory consultation ensures that seniors who are securing a reverse mortgage understand the process and have considered all the costs and benefits of their decision.  The counseling fee is typically $100 - $125.

Other Loan Closing Cost

  • Appraisal Fee
    An appraiser is responsible for assessing the current market value of your home. The cost of appraising usually ranges from $300 - $400. If property defects are discovered by the appraiser, a contractor must be hired to finish any repairs. Once completed, payments are made for a second visit by the appraiser to check if repairs have indeed been completed. Repair costs may be financed and completed after the reverse mortgage. In general, $50 - $70 is charged by appraisers for a follow-up examination.
  • Credit Report Fee
    Validates whether federal tax liens, or other judgments, had been made against the property. In general, it costs less than $20.
  • Document Preparation Fee
    Typically around $75 - $150. The final closing papers include the mortgage note and other recordable items.
  • Courier Fee
    Costing less than $50, the documents between the lender and loan investor are mailed overnight.
  • Title Insurance
    This is protection for the lender against losses incurred from property ownership disputes. The insurance cost may differ depending on the size of the loan.
  • Pest Inspection
    Covers the cost of determining termite infestation or any other wood-destroying organisms.
  • Flood Certification Fee
    Ascertains whether the property is situated on a federally chosen flood area. The fee paid is less than $20.
  • Escrow Fee
    For an amount of $150 to $450, a title search and other closing services are performed.
  • Survey Fee
    Performs a survey to determine the official boundaries of the property.  Costs under $250.

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Comments (9)


Razz A.
May 24, 2012
Can all closing cost of a reverse mortgage be paid/deducted from the loan amount.
Bills.com
May 25, 2012
I think what you are asking is, "Are the closing costs for a reverse mortgage rolled into the loan or paid upfront?" It is most common for the closing costs to be included in the loan, except of the cost of an appraisal. This does not mean the other closing costs are free, or are paid for by the lender.

A so-called no-cost refinance or mortgage is the same as getting a free cellphone when a person signs a two-year contract for cellphone service. The handset's cost is buried in each month's service fees. This is exactly the same with a no-closing-cost mortgage or refinance: The closing cost is paid for with either a higher interest expense or in an increase to the loan's balance.
GEORGE T.
Wanaque, NJ  |  March 09, 2011
It sounds to me like a reverse mortgage is not as good as we thought it was. It is got too many charges. I wonder how many people got screwed with this deal.
Bills.com
March 09, 2011
The reverse mortgage product is not for everyone who is over 62 and has equity, but it is an excellent product for some people. For instance, a homeowner with equity in the home whose cash flow dropped to the point where she could not make the mortgage payment, could stay in her home with a reverse mortgage and not have a monthly payment. The fees associated with a reverse mortgage may be worth paying for. Each person needs to look carefully at her own financial situation in total, when making any major financial decision, such as taking out a mortgage or a reverse mortgage.
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Ed H.
Ellenton, FL  |  March 27, 2011
I would like to know if fee's can be made from the equity in the home being mortgage?
Bills.com
March 27, 2011
I do not understand your question. If you are asking if someone earns a profit when a homeowner signs a contract for a reverse mortgage, the answer is yes. Please restate your question so that I may better understand it.
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Ed H.
Ellenton, FL  |  March 27, 2011
My questions is as follows; Can the $6,000 reverse mortgage fees that goes to the government and all the pre-reverse fees that go to all the rest of the people that are involved with the Mortgage. Can these monies be paid for with the proceeds of the home its self before the mortgage takes effect? This will mean that the person or persons getting the RE-MORTGAGE will not have to pay out of pocket before the mortgage takes effect. The monies can be gotten from the proceeds of the home.
Bills.com
March 28, 2011
The facts in your question confuse me. There should be no taxes or fees paid to a government (municipal, state, or federal) when a person signs a reverse mortgage contract. A reverse mortgage is a loan against the homeowner's equity, and not a purchase or transfer of the property. For your own financial safety, I urge you to consult with a lawyer in your state who has experience in contract law. I fear there may be events involved with this reverse mortgage that you do not understand, and I want a neutral party who is also your advocate to review the contracts you are being asked to sign.
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Ed H.
Alton, IL  |  March 29, 2011
Now I "KNOW" something is wrong if you have to point me in the direction of a "Thieving Lawyer". Is there not a free "Federal Government" agency set up to answer all the questions. Spend the monies on "Agents of Help", instead of X-Senators and Actors.
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