What a Reverse Mortgage Loan Costs 

FHA mortgage insurance: upfront and annual

Every HECM carries FHA mortgage insurance. Under HUD Mortgagee Letter 2017-12:

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• Upfront MIP: 2% of the maximum claim amount, for every borrower, no matter how much you draw at first. The maximum claim amount is the lesser of your home's appraised value (or purchase price) and the HUD limit, which is $1,249,125 for 2026 (HUD Mortgagee Letter 2025-22).

• Annual MIP: 0.5% per year of the outstanding balance, accrued and added to the loan.​

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What the insurance does: it backs FHA's guarantees on the loan. For example, the loan is generally non-recourse, which means you or your heirs won't owe more than the home is worth when the loan is repaid through its sale (CFPB).

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Origination fee

The origination fee pays the lender for processing the loan

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• The greater of $2,500 or 2% of the first $200,000 of the maximum claim amount plus 1% of anything above $200,000

• Max is $6,000​

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Third-party closing costs

These go to the people who handle your appraisal, title, and recording--not to the lender. HUD allows reasonable and customary amounts, no more than what's actually paid, for items like:

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• Appraisal (Often $650, as of November 2026; your appraisal cost may differ)

• Title examination and lender's title insurance (typically $1,000-$2,000)

• Recording fees and recording taxes (a percentage of the loan amount, paid as a tax to the county)

• Credit report

• Flood certification

• Survey, if required

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You'll also complete required counseling with an independent HUD-approved counselor before applying. Ask the counseling agency about its fee and whether it can be reduced.

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Your loan officer gives you a written estimate of these costs. Ask what's included and compare line by line.

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State recording taxes

Some states tax the recording of a mortgage. What we could confirm from official sources:

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• Minnesota: mortgage registry tax of 0.23% of the debt secured, plus 0.01% in Hennepin and Ramsey counties. 

• Florida: documentary stamp tax of 35 cents per $100 of the amount secured by a recorded mortgage

• Wisconsin and North Dakota: ask us what applies to your county.

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The amount "secured" on a reverse mortgage loan can be different from what you borrow, so your written estimate is the number to rely on.

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Servicing fees

The servicer sends your statements, manages your line of credit, and tracks taxes and insurance. HUD allows a monthly servicing fee of up to $30 (fixed-rate or annually adjusting loans) or $35 (monthly adjusting loans). Many loans charge none. When there is a fee, the lender sets aside part of your available funds at closing to cover it, and each month's fee is added to your balance.

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Interest: fixed vs adjustable

Interest is added to your balance each month, but only on money you've actually received, plus financed costs and mortgage insurance.

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• Fixed rate: usually one lump sum at closing. Your rate stays the same, but you take the full amount up front, and interest starts on all of it.

• Adjustable rate: lets you choose a line of credit, monthly payments, or a mix. The rate can change. The unused part of a line of credit can grow over time.

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Paying costs vs financing them into the loan

Most HECM costs, including the upfront MIP and the origination fee, can be paid from the loan proceeds instead of out of pocket. That keeps cash in your hands at closing, but:

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• Financed costs become part of your balance from day one.

• Interest and annual MIP then accrue on those costs too, so the balance grows over time.

• That leaves less equity for you or your heirs later.​

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How long you plan to stay in the home matters. Upfront costs are mostly fixed, so they weigh more if you move in a few years.

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Buying a home instead?

A HECM for Purchase has the same kinds of costs, combined with the purchase closing.

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