What does a reverse mortgage actually cost?
Every fee, explained in plain English
JP Dauber, NMLS# 386298
Reverse Mortgage Specialist
Last updated March 15, 2026
What you pay upfront
Let's walk through each cost, one at a time. We'll use a $400,000 home as our example.
FHA insurance premium
2% of your home's value. On a $400,000 home, that's $8,000. This pays for the non-recourse protection that guarantees you can never owe more than your home is worth. Same price with every lender — it goes to FHA.
Origination fee
This is the lender's fee for processing the loan. FHA caps it at $6,000. The formula: 2% of the first $200,000 plus 1% above that. Some lenders charge less, especially if you accept a slightly higher rate.
Closing costs
Appraisal ($400–$700), title search and insurance ($1,000–$2,500), recording fees, credit report — the same things you'd pay on any mortgage. Usually $3,000–$5,000 total.
Counseling fee
About $125, paid directly to the HUD-approved counseling agency. This is usually the only cost you actually pay out of pocket.
Here's the important part: almost all of these costs can be rolled into the loan itself. They come out of your proceeds — not a check you write at closing.
What you pay over time
The upfront costs get the most attention, but the ongoing costs are what grow your balance over the long run.
Interest on your balance
Interest builds on whatever you've borrowed and gets added to your balance each month. In 2026, adjustable rates are generally in the mid-5% to low-6% range. Because you're not making payments, the interest compounds — that's why the balance grows over time.
Annual FHA insurance (0.5%)
A small ongoing charge — 0.5% of what you owe per year, added monthly. This keeps your non-recourse protection active for the life of the loan.
Some lenders also charge a servicing fee (up to $30/month), but many fold it into the rate instead. Ask about it when you compare.
What these costs actually buy you
The fees aren't just paperwork charges. They pay for protections you won't find in other loans.
Non-recourse guarantee
The FHA insurance means you can never owe more than your home is worth. That one protection can save your family tens of thousands of dollars.
No monthly payments
The "cost" of building interest is the trade-off for never making a mortgage payment again. For many retirees, that cash flow relief changes everything.
Guaranteed access
Your line of credit can't be frozen or cut — unlike a HELOC. Once you're approved, the money is yours on your terms.
How this compares to the alternatives
Every financial option has a cost. The question is whether you're getting good value for yours.
Selling your home costs 5–6% in agent commissions plus moving expenses. On a $400,000 home, that's $20,000–$24,000 — more than the HECM upfront costs — and you lose your home.
A HELOC has lower upfront costs, but it requires monthly payments that can become hard to manage. And the lender can freeze your credit line any time they want.
Spending down your retirement savings to avoid borrowing has its own price — one you might not feel until it's too late.
The longer you stay in your home, the more sense the upfront costs make. A $15,000 cost over 10 years works out to $1,250 a year. Over 20 years, it's $750.
Know the costs before you commit
Reverse mortgage costs are real, and you should understand every dollar. But there are no hidden fees. Everything is disclosed, regulated by FHA, and reviewed during your counseling session. Most costs can be rolled into the loan so you don't pay out of pocket. The FTC's reverse mortgage guide is a good independent breakdown of what to expect.
Want to see what the numbers look like for your home? Try the calculator for an estimate, or schedule a conversation and I'll walk you through a detailed breakdown.