Reverse mortgage costs for a HECM start with upfront FHA mortgage insurance of 2% of the maximum claim amount (the lesser of the appraised value, the purchase price, or the $1,249,125 limit, valid through Dec 31, 2026), a capped origination fee, and closing costs. Interest and 0.5% a year in mortgage insurance are then added to your balance.
- Upfront FHA mortgage insurance: 2% of the maximum claim amount (the lesser of the appraised value, the purchase price, or the $1,249,125 limit, valid through Dec 31, 2026).
- Origination fee: capped at $6,000 by HUD rules.
- Ongoing: interest plus 0.5% annual mortgage insurance, added to your balance. A servicing fee may also apply.
- Most costs can be financed into the loan, but that reduces what's available to you.
Want this on paper? Get our free guide by email. We email the guide only: no calls, and no lender will contact you.
Get your free guideWhat are the upfront costs?
The fixed pieces are FHA's 2% upfront mortgage insurance premium and an origination fee capped at $6,000; third-party closing costs come on top.
| Cost | How it's set |
|---|---|
| Initial mortgage insurance premium (MIP) | 2% of the maximum claim amount (the home's appraised value or sale price, capped at $1,249,125, valid through Dec 31, 2026). Example: a $400,000 home means $8,000. |
| Origination fee | The greater of $2,500 or 2% of the first $200,000 of the maximum claim amount plus 1% of the amount above $200,000, capped at $6,000 (24 CFR 206.31(a)(1)). Lenders may charge less. |
| Third-party closing costs | Appraisal, title insurance, recording, credit report, survey, inspections. These vary by state and provider. |
| Counseling fee | Varies by agency. It may be reduced or waived if you can't afford it. |
What are the ongoing costs?
Interest plus 0.5% annual mortgage insurance are added to your balance, and a servicing fee may also apply.
- Interest, either fixed or adjustable, added to the balance each month
- Annual mortgage insurance: 0.5% of the outstanding balance per year, also added to the balance
- Servicing fee: some loans charge a monthly servicing fee; HUD caps it at $30 a month on fixed-rate and annually adjusting loans and $35 on monthly adjusting loans (HUD Handbook 4000.1); check the amount on your loan estimate
- Your own property charges: taxes, insurance, HOA dues, and maintenance (these are not loan costs, but they are required)
Why do reverse mortgage costs compound?
Because interest and mortgage insurance are charged on a balance that keeps growing, the loan grows faster over time. That's the trade-off for not making monthly payments. You can make voluntary payments at any time to slow that growth, without a prepayment penalty.
Curious about your own numbers? Rough range only, not a loan offer or pre-qualification. No sign-up, no credit check.
Try the estimate calculatorHow can you lower reverse mortgage costs?
- Compare at least two or three licensed lenders, and ask each for the same loan option.
- Ask whether the lender will reduce the origination fee or offer a lender credit.
- Draw only what you need. With a line of credit, interest accrues only on what you use.
See how costs affect your numbers in the estimator.
Which reverse mortgage costs are required?
The lender must give you a full list of costs and say clearly which charges you need to pay to get the loan and which you don't.
That rule is in 24 CFR 206.43(a). HUD's list of mandatory obligations paid at closing shows the usual required items (24 CFR 206.25(b)):
- The upfront FHA mortgage insurance premium and the origination fee
- The HECM counseling fee
- Recording fees and taxes, the credit report, a survey if one is required, title examination, the lender's title insurance, the appraisal and the flood certification
- Payoff of any existing mortgage or lien, and any repairs required as a condition of closing
If a quote includes a charge that isn't on a list like this, ask the lender whether it is required and what it pays for.
Do voluntary payments lower what a reverse mortgage costs?
Yes. You can pay part or all of a HECM at any time with no penalty, and every dollar you pay stops interest and mortgage insurance from growing on that dollar.
Federal rules allow full or partial prepayment "without charge or penalty at any time" (24 CFR 206.209(a)). There is one catch on fixed-rate loans: money you pay back on a fixed-rate HECM can't be borrowed again (24 CFR 206.19(h)(3)). On an adjustable-rate loan, partial payments are applied as your loan note says, so ask your servicer how a payment would affect your line of credit before you send one.
Rules in this section checked against the current eCFR text on October 31, 2026.
See a rough estimate for your home
Our estimate calculator takes about 30 seconds. It shows a rough range for your home, not a loan offer or pre-qualification. No sign-up and no credit check.
Try the estimate calculatorPrefer to read first? Get your free guide by email.
Frequently asked questions
How much are closing costs on a reverse mortgage?
They vary. The fixed pieces are FHA's 2% upfront mortgage insurance premium and an origination fee capped at $6,000. Third-party costs like appraisal and title vary by state and provider.
Can reverse mortgage costs be rolled into the loan?
Yes. Most costs can be financed, but that reduces the amount available to you and increases the balance that accrues interest.
Is there a prepayment penalty on a HECM?
No. You can repay part or all of a HECM at any time without a prepayment penalty.
Who wrote this guide
This guide is written and maintained by the Clear Reverse editorial team from the primary sources listed below. The "Last updated" date at the top shows when it last changed. Clear Reverse is an education service, not a lender or mortgage broker, and nothing here is legal, tax or financial advice. Spotted an error? Email hello@clearreverse.com. How we research and update our guides.
Sources
- HUD: HECM program page (maximum claim amount table) (lists the 2026 limit of $1,249,125, valid through Dec 31, 2026; accessed Oct 30, 2026)
- HUD Mortgagee Letter 2025-22 (2026 HECM limit) (dated Dec 11, 2025; limit applies to FHA case numbers assigned Jan 1 through Dec 31, 2026; accessed Oct 30, 2026)
- HUD Mortgagee Letter 2017-12 (2% initial and 0.50% annual mortgage insurance) (dated Aug 29, 2017; accessed Oct 30, 2026)
- 24 CFR 206.31 (origination fee may not exceed $6,000), eCFR (current text accessed Oct 31, 2026)
- CFPB: Reverse mortgages (consumer tools) (accessed Oct 30, 2026)
- HUD Handbook 4000.1, Single Family Housing Policy Handbook (HECM sections II.B and III.B) (Update 18, issued Aug 12, 2026; accessed Oct 30, 2026)
- 24 CFR 206.43 (cost disclosure to the borrower), eCFR (current text accessed Oct 31, 2026)
- 24 CFR 206.25 (first-year disbursement limits set by HUD notice), eCFR (current text accessed Oct 31, 2026)
- 24 CFR 206.209 (prepayment without penalty), eCFR (current text accessed Oct 31, 2026)
- 24 CFR 206.19 (payment plans), eCFR (current text accessed Oct 31, 2026)
Program rules change, so confirm details with a HUD-approved counselor and a licensed lender.