Reverse Mortgage Fees

Written by True Tamplin, BSc, CEPF®

Reviewed by Subject Matter Experts

Updated on July 11, 2023

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What Are Reverse Mortgage Fees?

Reverse mortgage fees refer to the charges associated with taking out a reverse mortgage, including origination fees, mortgage insurance premiums, appraisal fees, servicing fees, and closing costs.

These fees are deducted from the loan proceeds and can vary depending on the lender and location. It's crucial to understand these fees before committing to a reverse mortgage.

Types of Reverse Mortgage Fees

Reverse mortgage fees can be broadly categorized into origination fees, mortgage insurance premiums (MIP), third-party fees, interest rates, loan servicing fees, and closing costs. Each of these fees plays a specific role in the reverse mortgage process.

Origination Fee

Purpose and Calculation

The lender charges the origination fee to cover the costs associated with processing, underwriting, and closing the reverse mortgage. This fee is typically calculated as a percentage of the home's value or the maximum claim amount, whichever is less.

Factors Affecting the Origination Fee

The origination fee may vary depending on factors like the lender, borrower's credit history, and the complexity of the loan process. Borrowers can compare different lenders to find the best deal.

Mortgage Insurance Premium (MIP)

Purpose and Benefits

MIP is a fee required by the Federal Housing Administration (FHA) to insure reverse mortgages under the Home Equity Conversion Mortgage (HECM) program.

This insurance offers protection to both borrowers and lenders. It ensures that borrowers receive their loan proceeds, and lenders are protected from any potential losses due to borrower default or property value decline.

Initial and Annual MIP Calculations

There are two types of MIP: initial and annual. The initial MIP is a one-time fee.The annual MIP is an ongoing fee and charged monthly.

Factors Affecting MIP

The MIP is a mandatory fee for all HECM reverse mortgages. However, its amount may vary depending on the home's value, the maximum claim amount, and the outstanding loan balance.

Third-Party Fees

Third-party fees cover various services required during the reverse mortgage process. These fees are paid to independent professionals who provide essential services such as appraisals, title searches, and inspections.

Appraisal Fee

An appraisal determines the current market value of the property. The cost of an appraisal typically depends on the property's size, location, and complexity.

Title Insurance

Title insurance protects the lender against potential ownership disputes or liens on the property. The cost of title insurance depends on the property's value and the insurance provider.

Inspection Fee

Inspections are sometimes required to assess the property's condition and identify any potential repair needs. The cost of an inspection varies based on the property type and inspection scope.

Credit Report Fee

Lenders may charge a fee to obtain the borrower's credit report. This fee typically helps the lender assess the borrower's creditworthiness and financial history.

Escrow Fee

The escrow company charges an escrow fee for managing the disbursement of funds during the reverse mortgage process. This fee depends on the company and the complexity of the transaction.

Recording Fee

Local government offices charge recording fees for registering the reverse mortgage in public records. These fees vary based on the location and the number of pages to be recorded.

Survey Fee

A survey fee may be required to determine the property's exact boundaries and identify potential encroachments. The cost of a survey depends on the property's size and location.

Document Preparation Fee

Document preparation fees cover the cost of preparing and processing loan documents. These fees depend on the lender and the complexity of the loan process.

Types of Reverse Mortgage Fees

Interest Rates and Reverse Mortgage Fees

Interest rates play a crucial role in determining the total cost of a reverse mortgage. Borrowers can choose between fixed-rate and adjustable-rate reverse mortgages, each with its pros and cons.

Fixed-Rate Reverse Mortgages

Pros and Cons

Fixed-rate reverse mortgages offer the advantage of a consistent interest rate throughout the life of the loan, providing predictable monthly payments. However, they typically require a lump-sum disbursement, which may not be suitable for borrowers needing ongoing funds access.

Factors Affecting Fixed Interest Rates

Fixed interest rates are influenced by market conditions, the lender's offerings, and the borrower's credit history. Comparing rates from different lenders can help borrowers secure a competitive rate.

Adjustable-Rate Reverse Mortgages

Pros and Cons

Adjustable-rate reverse mortgages offer more flexibility in payment options, such as monthly installments, a line of credit, or a combination of both. However, interest rates may change over time, making it challenging to predict future loan costs.

Factors Affecting Adjustable Interest Rates

A combination of an index and a margin determines adjustable interest rates. The index reflects market conditions, while the margin represents the lender's markup.

Commonly used indexes include the London Interbank Offered Rate (LIBOR) and the Constant Maturity Treasury (CMT) rate.

Loan Servicing and Reverse Mortgages Fees

Loan servicing fees cover the costs of managing and administering the reverse mortgage, such as processing payments and providing customer support.

Definition and Purpose

The lender charges loan servicing fees or a third-party servicer to cover the costs associated with managing the reverse mortgage.

Types of Loan Servicing Fees

Monthly Servicing Fee

A monthly servicing fee is charged as a fixed amount added to the loan balance each month.

Set-Aside Servicing Fee

A set-aside servicing fee is an upfront lump sum collected at closing and set aside to cover future servicing costs. This fee is less common and is typically charged when the borrower has a higher risk of default.

Factors Affecting Loan Servicing Fees

Loan servicing fees may vary depending on the lender, loan type, and borrower's credit history. Comparing different lenders can help borrowers find a competitive servicing fee.

Closing Costs and Reverse Mortgage Fees

Closing costs include various fees and charges paid at the time of closing the reverse mortgage.

Definition and Purpose

Closing costs are a collection of fees required to finalize the reverse mortgage transaction. These fees cover services the lender, third parties, and government agencies provide.

Inclusion of Various Fees in Closing Costs

Closing costs typically include origination fees, mortgage insurance premiums, third-party fees, and any pre-paid interest or initial loan servicing fees. These costs can vary significantly based on factors such as the lender, property value, and borrower's credit history.

Factors Affecting Closing Costs

Closing costs are influenced by several factors, including the lender's fees, the borrower's creditworthiness, the property's value, and the complexity of the transaction. Borrowers can compare closing costs from different lenders to find the best deal.

Methods of Payment for Reverse Mortgage Fees

Borrowers have the option to finance fees into the loan or pay them out-of-pocket, each with its pros and cons.

Financing Fees Into the Loan

When financing fees into the loan, borrowers add the costs to the loan balance, spreading them out over time. This option can be helpful for borrowers with limited cash reserves but may result in higher overall loan costs due to accruing interest on the fees.

Paying Fees Out-of-Pocket

Paying fees out-of-pocket allows borrowers to avoid accruing interest on the fees, reducing the overall cost of the loan. However, this option requires upfront cash, which may only be feasible for some borrowers.

Pros and Cons of Different Payment Methods

The best payment method depends on the borrower's financial situation and preferences. Financing fees can benefit those with limited cash reserves while paying out-of-pocket fees can save money in the long run.

How to Reduce or Avoid Reverse Mortgage Fees

There are several strategies borrowers can employ to reduce or avoid reverse mortgage fees, including shopping around for lenders, negotiating fees, and exploring government programs or alternatives.

Shop Around for Lenders

Comparing different lenders can help borrowers find competitive rates and fees. Borrowers should request detailed fee breakdowns from multiple lenders to make an informed decision.

Negotiate Fees With Lenders

Some lenders may be willing to negotiate fees or offer discounts to secure a borrower's business. Borrowers should be prepared to discuss their financial situation and provide reasons for requesting reduced fees.

Utilize Government Programs and Assistance

Some state and local governments offer assistance programs for seniors, such as property tax deferrals or exemptions. These programs can help reduce the overall cost of homeownership and may indirectly impact reverse mortgage fees.

Explore Reverse Mortgage Alternatives

Borrowers should also explore alternatives to reverse mortgages, such as home equity loans, home equity lines of credit (HELOCs), or downsizing to a smaller, more affordable home. These options offer lower fees and more favorable terms.

How to Reduce or Avoid Reverse Mortgage Fees


Reverse mortgage fees can be a significant factor in the overall cost of a reverse mortgage.

It is important for borrowers to understand the types of fees associated with reverse mortgages, including origination fees, mortgage insurance premiums, third-party fees, interest rates, loan servicing fees, and closing costs.

Borrowers can reduce or avoid these fees by shopping around for lenders, negotiating fees, utilizing government programs and assistance, and exploring alternatives to reverse mortgages.

By taking the time to understand and minimize these fees, borrowers can make informed decisions about their financial futures and ensure they receive the maximum benefits from their reverse mortgages.

Reverse Mortgage Fees FAQs

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide, a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon, Nasdaq and Forbes.

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