Video TranscriptHi everybody, this is Miguel Vazquez, bringing you another video on reverse mortgages. Today we're going to talk about the fees and costs associated with a reverse mortgage, so you can get an idea of how much it costs to get one. The figures below are approximate examples — your actual costs depend on your home's value, the lender, and the program.
First, there are two main types of reverse mortgage:
• The FHA reverse mortgage (the HECM).
• The non-FHA reverse mortgage, also called a jumbo or proprietary reverse mortgage.
FHA (HECM) reverse mortgage costs
As a ballpark, an FHA reverse mortgage might total somewhere around $22,000 in this example (on a higher-value home). Here's how that breaks down into three parts:
1. Third-party / miscellaneous fees: about $2,500–$3,000. This is escrow, appraisal, notary, title, the HUD counseling fee, and recording the documents at the county recorder's office. Added together, those typically come to roughly $2,500–$3,000. (These aren't exact, but it's a good estimate.)
2. Origination fee: up to $6,000. This is what the reverse mortgage loan officer charges, and it's capped — an FHA reverse mortgage origination fee can't exceed $6,000. It's also negotiable: a loan officer can charge less, or even $0. So those first two parts together run about $8,500–$9,000.
3. FHA mortgage insurance: the largest piece. The upfront premium is calculated as 2% of your home's value. For example, on a $400,000 home, 2% is $8,000; on a higher-value home it's more. In the ~$22,000 total example above, the home value was high enough that the 2% insurance premium made up roughly $12,000–$14,000 of the total.
So on a $400,000 home, a rough total might be about $8,000 (FHA insurance) + $6,000 (max origination) + $2,500 (miscellaneous) = about $16,000.
What does the FHA mortgage insurance cover? It protects against any loss the lender might incur — and protects you and your heirs. For example: say you had a reverse mortgage for many years, never made payments, and the balance grew to $700,000. You pass away and leave the home to your heirs. Suppose a recession dropped the home's value to $300,000. Your heirs can sell it for fair-market value ($300,000) and pay that toward the balance — and the remaining shortfall is covered by the FHA mortgage insurance, not your family. Because it's a non-recourse loan, your heirs never have to pay more than the home is worth.
Non-FHA (jumbo / proprietary) reverse mortgage costs
The non-FHA closing costs are generally much lower, because there is no FHA mortgage insurance premium (it isn't an FHA-insured loan). You'll still have:
• The same miscellaneous third-party costs — roughly $2,500–$3,000 (appraisal, notary, title, etc.).
• An origination fee — which varies; if it were, say, $6,000, you'd be looking at roughly $8,000–$9,000 total.
So without the FHA mortgage insurance, the jumbo/proprietary option can cost roughly half of the FHA total. And remember the origination fee is negotiable with me or any loan officer, which can reduce those costs further.
I hope that clears up the fees and costs of a reverse mortgage. If you have any questions, feel free to call or text me at 562-881-9811 — I've been doing reverse mortgages for over 15 years. I work weekends, evenings, and holidays, and for my clients I'm also happy to do an in-home visit to walk you and your family through a proposal, with no obligation. Thank you and have a good day.
