Reverse Mortgage Closing Costs Explained
HECM, Jumbo & Second Reverse Mortgage Fees - What You'll Actually Pay
In this article we’re going deep into the oftentimes hidden world of the Reverse Mortgage closing costs. Very few lenders share this information publicly, and yes, in some cases, those costs are higher than what you’d pay for a traditional mortgage or home equity loan. But here’s what I think is important: Not all reverse mortgages have the same fees, and the majority of those fees don’t come out of your pocket.
For example, an FHA-insured HECM reverse mortgage has an upfront mortgage insurance premium of 2% of your home’s value, subject to FHA’s lending limit. That means on a $500,000 home, you’re looking at $10,000 in upfront FHA mortgage insurance alone. Now, before that number gives you sticker shock, understand that this fee doesn’t come out of your pocket…it gets added to the loan balance.
And here’s something else that doesn’t get discussed enough: That FHA mortgage insurance doesn’t apply to every type of reverse mortgage. Proprietary or jumbo reverse mortgages have their own fee structures, and second reverse mortgages are another option entirely. Depending on your age, home value, existing mortgage, and what you’re trying to accomplish, one program may make considerably more financial sense than another.
Since 2008, I’ve helped a little more than 470 seniors learn about and get reverse mortgages, and I believe you should understand exactly what you’re paying before deciding whether one is right for you.
So let’s break down the actual numbers, explain which Reverse Mortgage closing costs you might pay upfront, and discuss what you’re getting in return.
Which Reverse Mortgage Fees Do You Pay Out of Pocket?
There are two main categories of reverse mortgage closing costs: expenses you pay out of pocket and fees that can be financed into the loan. Let’s start with the ones you actually have to pay up front.
Appraisal Charges
All reverse mortgage lenders require an appraisal. Underwriters only accept FHA appraisals done through appraisal management companies(AMC’s). The total cost of a ONE UNIT suburban or urban appraisal is anywhere between $600 and $700. Multiple units, rural properties, homes with large acreage and Jumbo Reverse Mortgages will all increase the cost(I generally see Jumbos in the $800 range).
Reverse Mortgage Counseling
Before you can order your appraisal, you need to be counseled. You’ll speak with a HUD appointed Reverse Mortgage counselor who will explain your loan options, other alternatives and your responsibilities. In other words, they’ll basically repeat our initial call!
However, counseling IS a way to ensure you’re educated about reverse mortgages(believe it or not, some lazy or uneducated lenders actually skip over details). Counselings run about $150-$200. By the way, counseling is also required by all reverse mortgage lenders.
Ok, that’s it for the out of pocket Reverse Mortgage Fees. A final note; to keep it as manageable as possible, just about every counseling agency and appraisal management company takes credit card for payment.
HECM Closing Costs
The FHA-insured Home Equity Conversion Mortgage (HECM) is the most common type of Reverse Mortgage. And because it’s a government-insured program, its fees are regulated.
There are three major closing costs to understand: the lender’s origination fee, FHA mortgage insurance, and third-party closing costs.
HECM Origination Fee
This is what the lender charges to originate your Reverse Mortgage, and it is regulated by the FHA. They range from $2,500(for homes valued at $125,000 and under) to $6,000 for homes worth $400,000 or more.
Here’s how the origination fees are calculated. They charge 2% of the first $200,000 of your home’s value and 1% of anything over $200,000, up to the maximum of $6,000.
So, for example, if your home is worth $300,000, the origination fee is $5,000. And if your home is valued at $400,000, $600,000 or $1,200,000 the origination fee is $6000. If this is a little confusing don’t worry. You can always email me at jason@keyhomelending.com or set up a call and I’m happy to talk fees, rates and really everything Reverse Mortgages!
FHA Upfront Mortgage Insurance Premium (MIP)
This is the largest single closing cost associated with a HECM Reverse Mortgage.
Now, the FHA charges an upfront mortgage insurance premium of 2% of your home’s appraised value, up to the maximum HECM lending limit, which is $1,249,125 in 2026.
Calculating this number is easy; you just multiply the appraised home value by 2%. For example, a $300,000 home will be subject to a $6,000 upfront mortgage insurance premium. Of course, like all of the fees in this section, the MIP is added to the loan balance, so you don’t have to pay it out of pocket.
Now, I know what you’re thinking. That’s a lot of money for mortgage insurance!
But FHA mortgage insurance is a major part of what makes the HECM program different from a traditional mortgage or home equity loan.
It ensures that the loan is non-recourse(by the way, later you’ll find that Proprietary and Second Reverse Mortgages are non-recourse as well…but no mortgage insurance is charged). In English, if you owe more than your home is worth, the mortgage company can’t ask for their money back while you’re alive(as long as you continue to keep the home as your primary residence, maintain it, and continue to pay your property charges).
Almost as important, non-recourse means that your heirs won’t have to worry about a shortfall when you pass away. If you die and more is owed on the home than it’s worth, the FHA reimburses the lender, and by law, they can’t come after your estate or your family.
Again, you don’t pay that MIP premium out of your pocket. It’s financed into the Reverse Mortgage.
Third-Party HECM Closing Costs
Just like a traditional mortgage, a HECM has additional closing expenses.
These typically include title insurance, settlement or closing fees, recording charges, and possibly state doc/stamp/intangible taxes(depending on the state you live in).
For example, Florida is one state that has additional taxes to refinance, whereas California, New Jersey and Pennsylvania do not. Again, feel free to reach out and I’ll let you know the specifics for your state.
Anything Else?
I know this is obvious, but you still have to pay your ongoing property charges, including property taxes, homeowners insurance and HOA if you have an HOA.
The Bottom Line of HECM Reverse Mortgage Closing Costs
Yes, HECM Reverse Mortgages have closing costs that add to the loan balance, and FHA mortgage insurance can make those fees stand out. But for many retirees, the bigger question isn’t just what the loan costs.
It’s what the Reverse Mortgage allows them to accomplish.
If eliminating a monthly payment frees up your mortgage payment, maybe pays off your bills, or sets you up with a credit line that grows through the roof, those benefits deserve to be considered alongside the fees.
That’s the comparison I encourage every senior to make before deciding if a Reverse Mortgage is right for them…or not.
Jumbo Reverse Mortgage Closing Costs
Here’s where things get interesting. A Jumbo Reverse Mortgage(also known as a Proprietary Reverse Mortgage) has a completely different closing cost structure than the HECM.
And one of the biggest differences? There is NO FHA mortgage insurance premium!
That’s right. No 2% upfront FHA mortgage insurance charge and no ongoing 0.5% annual FHA mortgage insurance premium.
With that said, all Jumbo and Proprietary Reverse Mortgages(again they are the same thing) are required to be Non-Recourse. This means that you and your heirs aren’t responsible for any amount owed beyond the home value. This time however, the loan servicer picks up the tab instead of the FHA.
One quick note before we go down the Jumbo Reverse Mortgage closing cost rabbit hole. Just like a HECM, the origination and third party fees are all added to the loan balance and don’t come out of your pocket.
Jumbo Reverse Mortgage Origination Fees
Unlike HECMs, Proprietary Reverse Mortgages don’t have the same FHA regulated origination fee structure. Instead, each lender decides what they want to charge. Generally, the origination fee is from 1% to 5% of the actual loan amount, depending on the lender, their program and loan size.
This is why we shop each lender to figure out the smartest combination of loan size and fee structure. You might elect to max out your loan and thus be ok with higher fees. Or, on the other hand, maybe you don’t need the biggest loan size, and thus your fees will be on the lower end of the spectrum. Your specific needs will dictate which lender and which program we choose.
Third Party Jumbo Reverse Mortgage Closing Costs
Just like a HECM, Jumbo Reverse Mortgages have third-party fees. These generally include title insurance, settlement fees, recording charges and any applicable state or local taxes.
And, just like the HECM, you can add all of those fees into the loan itself, with the exception of the appraisal(Jumbo appraisals generally charge in the $800 range) and counseling session(still $150-200). Those two fees must be paid up front.
So Is a Jumbo Reverse Mortgage Cheaper Than a HECM?
The honest answer is…sometimes yes and sometimes no.
A Proprietary Reverse Mortgage doesn’t have a FHA mortgage insurance premium, but depending on the lender, program and loan size, the origination fee might be higher. Generally, the third party fees are equal to a HECM’s third party fees.
The only way to really know which program has lower closing costs is to compare the actual numbers.
And remember, cost is only one aspect of this loan. Based on my 18 years of experience with Reverse Mortgages, you need to look at your specific situation and what the loan does for you.
Finally, we recorded the below video to give you a deep dive into Jumbo Reverse Mortgages. Feel free to give it a watch if you’d like!
Second Reverse Mortgage Closing Costs
Now here’s an option that many seniors don’t even realize exists: a Second Reverse Mortgage.
Unlike a traditional Reverse Mortgage, a 2nd Reverse allows you to keep your existing first mortgage in place. That’s particularly attractive if you’ve already locked in a low interest rate that you don’t want to give up.
But what does it cost?
Second Reverse Mortgage Fees
The origination charge is just a flat fee of $3,995. This stays constant no matter what the loan size is.
And here’s something else to note; there is NO upfront or ongoing FHA mortgage insurance premium(however, just like all Reverse Mortgages, the Second Reverse is Non-Recourse).
In most states, we don’t even require title insurance, so that’s a major fee that also disappears(note: some states like South Carolina still require title insurance). You’ll still have some additional closing expenses including settlement and recording charges.
And just like a HECM or Proprietary Reverse Mortgage, the only upfront fees are the appraisal and counseling session.
So if you’ve got a first mortgage with a low interest rate, why would you want to refinance that entire loan into today’s higher rates just to access some of your equity?
The whole goal of the Second Reverse Mortgage is to get you extra cash WITHOUT disturbing your low-rate first mortgage or adding another required monthly principal and interest payment.
How Do Closing Costs Compare Between
Different Reverse Mortgages?
So now that we’ve gone through the different reverse mortgage programs and their closing costs, let’s put everything together. As you can see, the fees can vary quite a bit depending on which type of reverse mortgage you’re considering. Here’s a quick side-by-side comparison.
| Closing Cost | FHA HECM | Jumbo / Proprietary | Second Reverse |
|---|---|---|---|
| FHA Upfront Mortgage Insurance | 2% of applicable home value, subject to FHA limit | None | None |
| Origination / Lender Fee | FHA-regulated; up to $6,000 | 1-5% of Loan Size; Varies by Program | Flat Fee of $3,995 |
| Appraisal | $650+- | $800-900 | $650+- |
| Counseling | $150-200 | $150-200 | $150-200 |
| Title / Settlement Charges | Always Required | Always Required | No Title Fees in Most States |
| Costs Financed Into Loan | All Financed Besides Appraisal/Counseling | All Financed Besides Appraisal/Counseling | All Financed Besides Appraisal/Counseling |
*Fees and requirements vary by lender, program, and state. Reach out to confirm program & fee availability as they are subject to change with no notice.
Are Reverse Mortgage Closing Costs Worth It?
After looking at all these fees, you might be thinking, “Jason, why in the world would I want to pay all this money for a reverse mortgage?”
Fair question!
And the answer is that a reverse mortgage isn’t necessarily about getting the cheapest loan. It’s about what that loan can do for your retirement.
I’ve been in the reverse mortgage business since 2008, and I’ve helped more than 470 seniors and their families. I’ve seen firsthand how much of a difference the right reverse mortgage can make.
Think about a retired couple struggling with a $2,000 monthly mortgage payment. That’s $24,000 a year coming out of their retirement income just to make principal and interest payments.
Now imagine eliminating that required monthly mortgage payment. That’s $24,000 a year they no longer have to spend on those payments. Money that can stay in their retirement accounts, help cover everyday expenses, or simply give them some breathing room.
Of course, they’re still responsible for property taxes, homeowners insurance, maintenance, and meeting the other loan requirements. And interest continues to accrue on the reverse mortgage balance.
But the improvement in monthly cash flow can be enormous.
For other seniors, the benefit might be establishing a line of credit, reducing withdrawals from investments, or accessing home equity without taking on another required monthly principal and interest payment.
Does that mean a reverse mortgage is right for everyone? Absolutely not.
If you’re planning to sell your home in a year or two, the upfront costs may be difficult to justify. And depending on your circumstances, a traditional HELOC or another financing option might make more sense.
But I’ve seen reverse mortgages genuinely change people’s retirements. That’s why I believe the right question isn’t simply, “How much does a reverse mortgage cost?”
It’s “What am I getting in return?”
Let’s Look at Your Actual Numbers.
Every senior’s situation is different. Your age, home value, existing mortgage, location, and the type of program you choose all affect the Reverse Mortgage closing costs and available proceeds.
Rather than relying on generic estimates, let’s look at what a reverse mortgage would actually cost in your situation.
We’ll compare the available programs, explain the fees, and help you understand whether the numbers make sense for your retirement.