Reverse Mortgage Closing Cost Calculator

Notice that only two of these five, the appraisal and the counseling fee, may be paid out of pocket rather than rolled into your loan balance. In the calculator above, the origination fee and upfront MIP are filled in from the federal rules, and everything else (appraisal, title, recording, counseling) goes in the Other Closing Costs field, which starts at a $3,000 placeholder you should replace with the total from your Loan Estimate. The rest are financed, meaning they increase your starting balance before a single month of interest has even accrued.

Under 24 CFR 206.31 (in 24 CFR part 206), the origination fee a lender can charge on a HECM is capped by a set formula: the greater of $2,500 or 2% of the first $200,000 of the maximum claim amount plus 1% of any amount over $200,000, with a $6,000 cap regardless of home value. The calculator above fills in this maximum for the home value you enter; lower it if your lender charges less. In practice, this means a $200,000 home and a $600,000 home don't pay wildly different origination fees — the formula and the cap both work to keep this specific cost proportionate and predictable, unlike some other closing costs that scale more directly with home value.

The upfront mortgage insurance premium — 2% of your maximum claim amount — is typically the single largest component of HECM closing costs, often exceeding the origination fee, appraisal, and title costs combined on higher-value homes. It's a one-time charge set by HUD Mortgagee Letter 2017-12, financed at closing just like the origination fee, and separate from the 0.5% ongoing annual MIP that continues compounding into your balance for the life of the loan. Both premiums fund the same FHA insurance pool that backs the loan's non-recourse guarantee, but only the upfront portion is a true "closing cost" in the traditional sense.

Yes, in most cases — if you'd rather not have these costs compound against your balance from day one, many lenders allow you to pay the origination fee, upfront MIP, and other closing costs out of pocket at closing instead of financing them. This preserves more of your principal limit for actual draws rather than fees, at the cost of needing cash on hand at closing — a tradeoff worth discussing directly with your lender if you have the liquidity to make it.

Whether this makes sense depends heavily on your broader financial picture: if paying cash for closing costs would drain savings you'd otherwise want as a cushion, financing them and preserving liquidity is often the more prudent choice, even though it costs more in compounded interest over the life of the loan. There's no universally correct answer — it's a direct tradeoff between cash preserved today and balance growth avoided later.

Beyond the one-time closing costs above, some HECM servicers charge a monthly servicing fee. Whether your loan has one, and how much it is, is shown on your Loan Estimate; ask for the figure there rather than relying on a general range. Like everything else on a reverse mortgage, this fee isn't billed separately; it's added to your balance each month alongside interest and MIP, compounding right along with them. The calculator above does not include a servicing fee, so if your loan carries one, your real balance will grow somewhat faster than the projection shows.

Because the origination fee formula and upfront MIP percentage are set by HUD rather than negotiated, the biggest cost differences between lenders usually show up in the smaller, non-standardized items: title insurance rates, escrow and settlement fees, and any lender-specific processing charges. It's still worth requesting a full loan estimate from more than one lender, since these smaller fees can add up to a meaningful difference even when the two largest cost components are identical by regulation. Ask specifically for an itemized breakdown rather than a single bottom-line closing cost figure, so you can tell which fees are fixed by federal rule and which are actually negotiable.

Compare a $200,000 home against a $600,000 home to see how the fee mix shifts with value. On the $200,000 home, the origination fee formula gives 2% of $200,000, or $4,000 — below the $6,000 cap, and upfront MIP adds $4,000 (2% of the maximum claim amount), for $8,000 in these two fees combined. On the $600,000 home, the origination fee formula gives 2% of the first $200,000 ($4,000) plus 1% of the remaining $400,000 ($4,000), totaling $8,000 — but capped at $6,000 under current rules — while upfront MIP scales fully with value to $12,000. Combined, that's $18,000 on the larger home versus $8,000 on the smaller one.

Notice the asymmetry: the origination fee is capped and grows slowly, while upfront MIP scales linearly with home value and has no cap at all. On higher-value homes, MIP dominates the total closing cost far more than the origination fee does — which is worth knowing before assuming a bigger home simply means proportionally bigger fees across the board.

On a $350,000 home, the origination fee formula works out to 2% of the first $200,000 ($4,000) plus 1% of the remaining $150,000 ($1,500), for a total of $5,500 — under the $6,000 cap. Upfront MIP at 2% of a $350,000 maximum claim amount adds $7,000. Those two fees total $12,500 and are fixed by federal rule. The appraisal, title, escrow, recording and counseling charges are not, so this example uses the calculator's $3,000 placeholder for them; your Loan Estimate will give the real total. With that assumption, financed closing costs come to $15,500.

That means a borrower who takes $60,000 in cash at closing on this home starts with a loan balance of $75,500 once financed costs are added. The calculator above builds that starting balance for you: enter the $350,000 value, age 72, a 7% expected rate and $60,000 as cash to draw (HUD's first-year limit allows up to $62,620 in cash for that borrower), and the projection table starts from payoff plus financed costs plus the draw.

The costs then compound like the rest of the balance. At a 7% rate plus the 0.5% annual MIP, the $15,500 of financed costs alone grows to $32,737 by year 10 and $47,577 by year 15, more than three times the sticker amount, without a dollar of it reaching your pocket. Paying them in cash at closing would keep that growth off the balance.

The calculator above computes the upfront MIP as 2% of the maximum claim amount (HUD Mortgagee Letter 2017-12), the maximum origination fee from 24 CFR 206.31 (24 CFR part 206), and the maximum claim amount as the lesser of your home value and the 2026 FHA limit of $1,249,125 (HUD's HECM page). It adds your own estimate of the other closing costs, puts the total into the starting balance, and projects it forward using the same mechanics as our reverse mortgage amortization calculator. For HUD's official origination fee formula and MIP structure, see HUD's HECM program page and the CFPB's reverse mortgage guidance, which both discuss the specific fees and caps described above.