How much does a reverse mortgage cost?

On a $500,000 home, expect roughly $10,000 in upfront FHA mortgage insurance (2% of value), an origination fee up to about $6,000, and $3,000 to $5,000 in third-party closing costs, plus $125 to $200 for counseling. Total upfront cost commonly lands between $18,000 and $22,000, most of which can be financed into the loan.

What is the FHA mortgage insurance premium on a reverse mortgage?

Two parts. Upfront, 2% of the home's appraised value up to the 2026 limit of $1,249,125, paid at closing. Annually, 0.5% of the outstanding loan balance, accrued rather than billed. That insurance is what makes the loan non-recourse and guarantees your funds even if the lender fails.

How much is the reverse mortgage origination fee?

FHA caps it: 2% of the first $200,000 of home value plus 1% of the amount above that, with a $2,500 minimum and a $6,000 maximum. Lenders can and sometimes do charge less, and it's a fair thing to ask about directly.

Can reverse mortgage closing costs be financed?

Almost always, yes. Most borrowers roll the costs into the loan rather than paying cash. That's convenient, but it isn't free, financed costs become part of the balance and accrue interest for the life of the loan.

What interest rate does a reverse mortgage charge?

Adjustable-rate HECMs are tied to the one-year CMT or SOFR index plus a lender margin and adjust monthly or annually with a lifetime cap. Fixed-rate HECMs are limited to a single lump-sum draw. Interest accrues only on the amount you have actually drawn, not on your full principal limit.

Are there ongoing monthly fees?

There can be a servicing fee, historically up to $30 to $35 per month, though most lenders no longer charge it. You continue to pay property taxes, homeowners insurance, any HOA dues, and maintenance, which are the real ongoing costs of the program.

Is a reverse mortgage worth the cost?

It depends on time horizon. Upfront costs are largely fixed, so the longer you stay in the home, the more they amortize into insignificance. Staying 10 to 20 years usually makes the math work well. Moving in three to five years usually doesn't.

Are reverse mortgage fees negotiable?

The origination fee can vary by lender within the FHA cap, and some lenders credit part of it. FHA mortgage insurance and third-party costs such as appraisal, title and recording are not negotiable. Comparing two full written estimates is the only reliable way to see the difference.

Costs & Fees

What a reverse mortgage actually costs.

Reverse mortgages are more expensive up front than a traditional loan, and nobody should pretend otherwise. Here is every fee, what it pays for, and when the math works.

The honest headline: a HECM costs more up front than a home equity loan or a traditional refinance. The reason is FHA mortgage insurance, which is also what makes the loan non-recourse, guarantees your line of credit will be there even if the lender goes under, and lets you stay in the home no matter how long you live or what happens to values. You are buying real protection, not paying a junk fee.

Whether that price is worth paying is a time-horizon question, which is where this page ends up.

Every cost, on a sample $500,000 Twin Cities home

Reverse mortgage cost breakdown
Cost	What it is	Estimate
Upfront FHA mortgage insurance premium	2% of appraised value (capped at $1,249,125)	$10,000
Origination fee	2% of first $200K + 1% above, $6,000 max	$5,000
Appraisal	Paid to an independent FHA appraiser	$600 – $900
Title, settlement and recording	Standard Minnesota third-party costs	$2,000 – $3,500
HUD counseling	Independent, sometimes waived by income	$125 – $200
Annual FHA mortgage insurance	0.5% of the loan balance, accrued	Ongoing
Servicing fee	Often $0 today; historically up to $35/month	$0 – $35/mo
Interest	Accrues only on funds actually drawn	Ongoing

Illustrative 2026 figures for a $500,000 home. Your written estimate will differ.

Total upfront on that example typically lands between $18,000 and $22,000, and most borrowers finance it rather than writing a check.

Financing the costs isn't the same as avoiding them

Rolling $20,000 of closing costs into the loan means your balance starts at $20,000 and accrues interest and mortgage insurance from day one. Over 15 years at 7%, that financed $20,000 becomes roughly $55,000 of balance. It's still usually the right call, because most borrowers pursuing a HECM want to preserve cash, but it belongs in the decision.

How interest actually accrues

Interest is charged only on what you've drawn. If your principal limit is $250,000 and you take $80,000 to pay off an existing mortgage, interest accrues on $80,000 plus financed closing costs, not on $250,000. That's why a line of credit is generally cheaper than a lump sum: undrawn funds cost you nothing and the available credit line grows.

When the cost is worth it, and when it isn't

Upfront costs are essentially fixed, so the longer the loan lives, the smaller they look per year. Twenty thousand dollars spread across 15 years of eliminated mortgage payments is usually a clear win. The same $20,000 spread across four years before a move to be near the grandkids in Arizona rarely is.

Cheaper alternatives worth comparing honestly: a HELOC (lower cost, but requires monthly payments and can be frozen), a cash-out refinance (lower cost, but you resume a monthly payment), or simply selling and right-sizing. Brian will run those side by side rather than steering you toward the one with a commission attached.

Next: see whether you meet the requirements, read the pros and cons, or estimate your proceeds.

FAQ

Cost questions

What homeowners want to know before they'll sit down for a real estimate.

Let's explore your options

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