What a reverse mortgage costs, line by line
Each charge a HECM can carry, priced in dollars on one home: what is paid at closing, what is held back, and what keeps adding to the balance afterward.
Cash you can use in the first 12 months
$24,140
Then $45,360 more after month 12, growing at 6.49 % a year while unused.
| Factor at age 74, 6.625 % | 0.405 |
| Maximum claim amount | $280,000 |
| Principal limit (line 1) | $113,400 |
| Upfront MIP, 2 % (line 3) | $5,600 |
| Origination fee | $4,800 |
| Other closing costs | $3,500 |
| Mortgage paid off (line 5) | $30,000 |
| Mandatory obligations (line 10) | $43,900 |
| First-year limit (line 21) | $68,040 |
| Net principal limit (line 25) | $69,500 |
Expected rate 6.65 % (10-year Treasury + margin), read as 6.625 % in HUD's table. Estimate, not a loan offer.
| Year | Age | Loan balance | Unused credit line |
|---|---|---|---|
| 1 | 75 | $46,835 | $74,147 |
| 2 | 76 | $49,967 | $79,105 |
| 3 | 77 | $53,308 | $84,394 |
| 5 | 79 | $60,675 | $96,058 |
| 10 | 84 | $83,861 | $132,765 |
| 15 | 89 | $115,907 | $183,498 |
| 20 | 94 | $160,199 | $253,618 |
| 25 | 99 | $221,416 | $350,533 |
| 30 | 104 | $306,025 | $484,482 |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
On a $280,000 home with a youngest borrower aged 74, the charges taken at closing come to $13,900: $5,600 of upfront mortgage insurance (2 % of the maximum claim amount), an origination fee of up to $4,800, and $3,500 of third-party charges used here as an example, since no reliable average is published. That is 12.3 % of the $113,400 principal limit. None of it has to come out of pocket: it is financed, together with the $30,000 mortgage the loan pays off. After closing, two charges never stop. The balance grows each month by the note rate (5.99 % at today's example) plus 0.5 % of annual mortgage insurance, so the $43,900 financed at closing reaches $83,861 after 10 years with no cash drawn. A monthly servicing fee is allowed up to $30 or $35, and when charged it is set aside from the principal limit.
The bill on a $280,000 home at 74
The table below takes one household and prices each line. The youngest borrower is 74, the home appraises at $280,000, an old mortgage of $30,000 is still open, and the expected rate is 6.65 % (the 10-year Treasury at 5.15 % plus an example margin of 1.5 %). HUD's factor for that age and rate is 0.405, so the principal limit is $113,400. Every cost below is subtracted from it.
| Line | Amount | Rule |
|---|---|---|
| Upfront mortgage insurance | $5,600 | 2 % of the $280,000 maximum claim amount |
| Origination fee (maximum) | $4,800 | 24 CFR 206.31(a)(1) |
| Third-party charges (example) | $3,500 | Not more than the amount actually paid |
| Costs at closing | $13,900 | 12.3 % of the principal limit |
| Mortgage paid off (not a cost) | $30,000 | Line 5 of the HUD payment plan |
| Financed at closing | $43,900 | Starts the loan balance |
The old mortgage is not a cost of the reverse mortgage, but it sits in the same block of the HUD form, among the mandatory obligations, and it weighs on the first-year rule in the same way. Here the obligations total $43,900, under half of the principal limit, so the borrower can still draw $24,140 in the first 12 months and $45,360 more after that.
Mortgage insurance, the largest charge on this home
The upfront premium is 2 % of the maximum claim amount, the lesser of the appraised value and the $1,249,125 limit of 2026. It does not depend on how much you borrow: a borrower who takes nothing at closing pays the same $5,600 as one who draws the maximum. The Handbook allows the lender to pay part or all of it; a credit of that kind appears on the payment plan as cash from the lender, line 12, and lowers what is financed. The mortgage insurance page prices both premiums and explains what the insurance buys.
The origination fee and its ceiling
The lender's fee is capped by regulation, not by custom. The ceiling is the greater of $2,500 and 2 % of the first $200,000 of the maximum claim amount plus 1 % of the rest, never more than $6,000. On $280,000 that gives $4,000 plus $800, or $4,800. The text of 24 CFR 206.31 adds that a lender may accept a lower fee. It is a ceiling, so it can be negotiated, and on this home every dollar removed from it is a dollar more available in the first year. The origination fee page has the cap for each home value.
Change the third-party charges
Cash you can use in the first 12 months
$24,140
| Factor at age 74, 6.625 % | 0.405 |
| Maximum claim amount | $280,000 |
| Principal limit (line 1) | $113,400 |
| Upfront MIP, 2 % (line 3) | $5,600 |
Third-party charges: a closed list, priced at cost
Section 206.31(a)(2) names what else the lender may collect at closing, in reasonable and customary amounts and never more than it actually paid: recording fees and recording taxes, the credit report, a survey if one is required, title examination, the lender's title insurance, the appraiser's fee for the first appraisal, flood certification, and other items HUD authorizes by notice. If the home needs repairs after closing, a repair administration fee of up to 1.5 % of the repair money or $50, whichever is greater, can be added to the balance.
We do not print an average for this group, because we found no official series to quote and an invented figure would be worse than none. The $3,500 in the example is a round number chosen to show the arithmetic; replace it with the amounts on the lender's written estimate. The cap at cost matters more than any average: a lender cannot bill you more for the appraisal, the title search or the recording than it paid for them.
Servicing fee: often zero, capped when charged
Some lenders build the cost of servicing into the note rate and charge no monthly fee. Those that charge one are limited by the Handbook to $30 a month on a fixed or annually adjusting HECM and $35 on a monthly adjusting one. The fee is not paid from your pocket: the lender sets aside, at closing, enough of the principal limit to pay it each month until age 100, discounted at the note rate plus the annual premium. At 74, a $30 fee freezes $4,541 of the principal limit, and a $35 fee $5,297. On the example home, the $30 fee lowers the credit available after the first year from $45,360 to $40,819. That is a reason to ask early whether the offer has a monthly fee or not.
The costs that keep running after closing
A HECM has no monthly payment, which means its two running costs are paid by the balance itself. Interest accrues at the note rate, and the annual premium at 0.5 % of the outstanding balance, both from the closing date. With an initial note rate of 5.99 %, the balance grows by about 6.49 % a year, compounded monthly. The $43,900 financed at closing on the example home becomes $46,835 after one year and $83,861 after ten, of which $36,883 is interest and $3,079 is insurance. Each later draw adds its own share. The rate of an adjustable loan follows the 1-year Treasury, so these figures move with it.
Grow the amount financed at closing
Loan balance after 10 years
$83,861
| Effective yearly growth | 6.69 % |
| Years to double | 10.7 |
| Interest | $36,883 |
| Mortgage insurance | $3,079 |
So the offer with the lowest closing costs is not always the cheapest over time. A smaller origination fee paired with a higher margin can cost more on a long loan, because the margin is charged on the whole balance every month, and a higher margin also lowers the principal limit through the expected rate. The loan balance page follows a balance over 30 years, and the full calculator shows every line of the payment plan with your own numbers.