The HECM origination fee: the cap for each home value
The most a lender may charge to originate a HECM, read from the federal rule, with the fee for each home value and what a lower fee changes in your cash.
Highest origination fee allowed
$5,400
1.59 % of the maximum claim amount.
| Maximum claim amount | $340,000 |
| 2 % of the first $200,000 | $4,000 |
| 1 % above that | $1,400 |
| Formula result | $5,400 |
| Floor and cap | $2,500 to $6,000 |
A lender may charge less or nothing; the fee can be financed in the loan.
| Home value | Fee cap | Share |
|---|---|---|
| $100,000 | $2,500 | 2.50 % |
| $150,000 | $3,000 | 2.00 % |
| $200,000 | $4,000 | 2.00 % |
| $300,000 | $5,000 | 1.67 % |
| $400,000 | $6,000 | 1.50 % |
| $600,000 | $6,000 | 1.00 % |
| $1,000,000 | $6,000 | 0.60 % |
Worked out by Radif Partners · How we calculate · factors read on hud.gov · not a loan offer
A lender may charge a HECM origination fee of up to the greater of $2,500 and 2 % of the first $200,000 of the maximum claim amount plus 1 % of the part above it, with a hard ceiling of $6,000 (24 CFR 206.31(a)(1)). In practice, the $2,500 floor applies to every home worth $125,000 or less, the fee is 2 % of the value up to $200,000 ($4,000), each dollar above that adds one cent, and the $6,000 ceiling is reached at $400,000. A $260,000 home carries a cap of $4,600. The rule fixes a maximum, not a price: it says lenders may accept a lower fee, and the fee can be fully financed. For a 72-year-old with that home and no mortgage, a waived fee raises first-year cash from $50,728 to $55,328.
The text of 24 CFR 206.31(a)(1)
The fee rule is one paragraph of the HECM regulation. The loan origination fee limit is the greater of $2,500 or 2 % of the maximum claim amount up to $200,000, plus 1 % of any portion above $200,000. The total may not exceed $6,000. The same paragraph says that lenders may accept a lower fee, that the fee may be used to pay a sponsored third-party originator, and that it may be fully financed with the mortgage. The section on eCFR has the full wording.
The base is the maximum claim amount, not the loan: the lesser of the appraised value and the $1,249,125 limit of 2026. Two borrowers with the same home pay the same maximum fee even if one is 63 and borrows little while the other is 85 and borrows much more.
Three thresholds: $125,000, $200,000, $400,000
The formula breaks into four zones. Up to $125,000 of value, 2 % is less than the floor, so the floor of $2,500 is the cap. From there to $200,000, the cap is 2 % of the value. Above $200,000, each extra dollar of value adds only 1 %, so the cap climbs slowly from $4,000 until it meets the $6,000 ceiling at $400,000. Beyond that, value no longer matters.
| Home value | Fee cap | Share of the value |
|---|---|---|
| $100,000 | $2,500 | 2.50 % |
| $125,000 | $2,500 | 2.00 % |
| $150,000 | $3,000 | 2.00 % |
| $175,000 | $3,500 | 2.00 % |
| $200,000 | $4,000 | 2.00 % |
| $250,000 | $4,500 | 1.80 % |
| $340,000 | $5,400 | 1.59 % |
| $400,000 | $6,000 | 1.50 % |
| $600,000 | $6,000 | 1.00 % |
| $1,249,125 | $6,000 | 0.48 % |
Measured against the value, the fee is heaviest on small homes: 2.5 % at $100,000, 2 % from $125,000 to $200,000, then a falling share, 1.5 % at $400,000 and under 0.5 % near the national limit.
Fee cap for your home value
Highest origination fee allowed
$3,500
| Maximum claim amount | $175,000 |
| 2 % of the first $200,000 | $3,500 |
| 1 % above that | $0 |
| Formula result | $3,500 |
What a lower fee changes in your cash
The fee is a mandatory obligation, deducted from the principal limit at closing like the mortgage insurance. Its effect depends on which branch of the first-year rule applies. Take a borrower aged 72 with a $260,000 home and no mortgage. The principal limit is $100,880, and the obligations ($5,200 of upfront insurance plus a $4,600 fee) stay well under half of it. The first-year room is then 60 % of the principal limit minus the obligations, so every dollar of fee comes out of first-year cash: $50,728 with the full fee, $55,328 if the lender waives it.
Now give the same household a $50,000 mortgage to pay off. The obligations reach $59,800, more than half of the principal limit, and the first year switches to obligations plus 10 %. First-year cash is $10,088 whether the fee is charged or not. The fee still costs money: the credit left after the first year falls from $35,592 without it to $30,992 with it, and the $4,600 sits in the balance, accruing interest and annual insurance from day one.
Compare the maximum fee with a waived fee
Cash you can use in the first 12 months
$10,088
| Factor at age 72, 6.625 % | 0.388 |
| Maximum claim amount | $260,000 |
| Principal limit (line 1) | $100,880 |
| Upfront MIP, 2 % (line 3) | $5,200 |
Small homes: where the floor weighs most
On a modest home, the $2,500 floor is a large slice of what the loan can lend. An 80-year-old with a $120,000 home has a principal limit of $55,320 at today's example rate. The maximum fee of $2,500 plus $2,400 of upfront insurance takes 8.9 % of it before any third-party charge. On a home at the national limit, the $6,000 fee is a far thinner share. For small homes the gap between the cap and what a lender actually quotes is worth more, in proportion, than anywhere else in the table.
Financed or paid at closing
The regulation allows the fee to be fully financed; the HUD payment plan then counts it inside the mandatory obligations, line 10 of the form. You may also bring cash to closing to cover part of the costs; the form records it on line 11, and that amount never enters the balance. The difference shows over time. A $4,600 fee left in the balance at a note rate of 5.99 % plus the annual premium becomes $8,787 after ten years. Paid in cash, it stays $4,600.
Comparing offers on fee and margin
Because the regulation only sets a ceiling, two lenders can quote very different fees on the same home. The fee is paid once; the margin is charged every month on the balance and also enters the expected rate that reads HUD's factor table. A lower fee with a higher margin can therefore leave you with a smaller principal limit and a faster-growing balance. The rates page shows what a quarter point of margin does to the factor, and the costs page lists the charges that come on top of the fee.
The fee should not be confused with the other lines at closing. It does not include the upfront mortgage insurance, which goes to the FHA, nor the appraisal, title, recording and credit report charges, which are passed on at what the lender paid for them. HUD's own calculator asks for the fee in the same field as those other closing costs, so read the lender's estimate line by line to see which part is the origination fee.