Myth or Fact – Reverse Mortgages are Expensive

Reverse Mortgage Myth: Reverse Mortgages are expensive

Reverse Mortgage Fact: Reverse Mortgages have fees just other mortgages, not necessarily more expensive.

Reverse mortgages have fees similar to other mortgages. Below is a list of fees associated with a reverse mortgage.

Upfront Costs:

• • Origination Fee $2,000 – $6,000: based on your home’s value, with a cap set by the Federal Housing Administration (FHA) for Home Equity Conversion Mortgages (HECMs).   
  • Mortgage Insurance Premiums (MIP): HECMs require both an upfront MIP and an annual MIP. The upfront MIP is 2% percentage of your home’s value. 
  • Appraisal Fee ($500-$700): An appraisal is required to determine the value of your home, which is a key factor in calculating how much you can borrow.   
  • Counseling Fee ($200): You’re required to complete counseling with a HUD-approved agency before getting a HECM. While this is a relatively small fee, it’s an out-of-pocket expense.   
  • Other Closing Costs (~$2,000): Like any mortgage, there are other closing costs, such as title fees, recording fees, and potentially survey fees.   

Why These Costs Matter:

• • Reduced Equity: These costs reduce the equity you have in your home. These fees are taken out of the loan proceeds so you typically don’t bring cash to closing.

What You Can Do:

• • Shop Around: Compare offers from different lenders to find the best terms and lowest fees.
  • Seek Advice: Talk to a financial advisor or a counselor at a HUD-approved agency to get unbiased advice.

Reverse mortgages can be a useful financial tool for eligible seniors looking to supplement income, pay for healthcare, or cover living expenses, but they also come with complexities that should be thoroughly understood before proceeding.

Learn more about eligibility requirements for a reverse mortgage, situations where a reverse mortgage is best used, and common myths around reverse mortgage that we debunk with facts