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Reverse Mortgage Costs: Fees, Mortgage Insurance and Your Principal Limit

Mortgage insurance, the origination fee cap, closing costs, how the balance grows and what sets your principal limit.

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Talk to Maggie directly: cell (916) 549-3131 (text or call) · maggie@loveyoursurroundings.coMaggie B. Hopkins, NMLS #349517 · Surroundings NMLS #2528307

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What does a reverse mortgage cost?

This page is general information, not legal, tax or financial advice for your situation. Rules can change, so every fact below names its source and date.

A HECM has four kinds of cost: FHA mortgage insurance, the lender's origination fee, third-party closing costs, and the interest that builds on the balance. The CFPB's reverse mortgage page (last reviewed August 28, 2026) is blunt about it: the loan is not free. Interest and fees are added to the balance each month, so the balance grows and your equity shrinks.

Most of these costs can be paid from the loan itself instead of out of pocket. That makes them easy to overlook. They are still real, and they still reduce what's left for you or your heirs.

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How does the FHA mortgage insurance work?

Every HECM carries FHA mortgage insurance. It is what makes the loan non-recourse, so neither you nor your heirs owe more than the home is worth when it's sold. It also protects you if a lender can't make your payments.

There are two parts. HUD's Mortgagee Letter 2017-12 (August 29, 2017) set them for case numbers assigned on or after October 2, 2017:

Upfront premium: 2% of the maximum claim amount, for every borrower, no matter how much you draw at closing.
Annual premium: 0.50% of the outstanding balance, added to the balance over time.

That letter was the most recent HUD notice changing these rates that we found when we checked on October 22, 2026. Federal rules (24 CFR 206.105) let HUD adjust them by notice, so confirm the current rates on your Loan Estimate.

Is there a limit on the origination fee?

Yes. Federal rules set a ceiling on the lender's origination fee. Under 24 CFR 206.31 (checked October 22, 2026), the limit is the greater of $2,500, or 2% of the first $200,000 of the maximum claim amount plus 1% of any amount above $200,000. The total can't go over $6,000. The same rule lets HUD raise that ceiling by notice in step with inflation, so check the figure on your Loan Estimate.

That's a ceiling, not a set price. The rule says lenders may accept a lower fee. This is one place where shopping matters. As a mortgage broker, Maggie compares how different approved lenders price the same HECM. You can compare our quote against anyone's.

What other closing costs should you expect?

24 CFR 206.31 lists the third-party costs a lender may collect, at reasonable and customary amounts and no more than what was actually paid. They include:

recording fees and taxes,
a credit report,
a survey, if required,
title examination and the lender's title insurance,
the appraisal, and
flood certification.

If the home needs repairs after closing to meet FHA standards, the lender may also charge a small repair administration fee, capped by the same rule. HECM counseling may have its own fee, which the counselor will explain.

Some loans also include a servicing fee set-aside, where part of your principal limit is held back to cover monthly servicing charges (24 CFR 206.19(f)(3)). Ask each lender whether they charge one.

How does the loan balance grow over time?

Under 24 CFR 206.19(g), interest starts on the day the loan funds and is added to the balance every month. The annual mortgage insurance is added too. Because you don't make monthly payments, next month's interest is charged on a slightly larger balance. That's compound growth, working against your equity instead of for it.

In words: a loan that starts with a small balance can grow a great deal over 10 or 20 years. The more you draw, and the higher the rate, the faster it grows. Whether your home's value grows at the same pace is unknown.

You can slow it down. Under 24 CFR 206.27 a HECM may be prepaid in full or in part, and the rules for prepayment are in 24 CFR 206.209. Some borrowers make voluntary payments to keep the balance in check. With an adjustable-rate line of credit, a payment can also free up room to borrow again later.

What is the principal limit, and what sets it?

The principal limit is the most a HECM can provide. 24 CFR 206.3 says it's figured from three things:

The age of the youngest borrower or eligible non-borrowing spouse. Older ages generally mean a higher limit. If your spouse is younger, their age is used.
The expected interest rate. Lower rates generally mean a higher limit.
The maximum claim amount. That's the home's appraised value, the purchase price on a HECM for Purchase, or the national HECM limit, whichever is least.

HUD publishes the tables (principal limit factors) that turn those three into a percentage. The CFPB's payment options page (last reviewed July 11, 2022) says the same: older borrowers, higher-value homes and lower rates generally mean a higher limit.

The principal limit is not cash in your hand. Upfront costs, any existing mortgage payoff and any required set-asides come out of it first.

What is the HECM limit for 2026?

HUD's news release of December 11, 2025 (No. 25-145) set the 2026 HECM maximum claim amount at $1,249,125. It applies to FHA case numbers assigned from January 1, 2026 through December 31, 2026, in every area of the country. It rose from $1,209,750 in 2025.

That number is a ceiling on the home value used in the math. It is not the loan amount. If your home is worth more than the limit, the HECM figures your principal limit as if the home were worth the limit. That's when some owners of higher-value homes look at a proprietary (jumbo) reverse mortgage.

How do you compare the cost of two reverse mortgage offers?

Ask each lender for a Loan Estimate for the same payout plan, on the same day if you can. Then compare:

the margin or rate,
the origination fee, against the federal ceiling,
title, escrow and other third-party costs,
any servicing fee,
the principal limit and how much you can actually reach in year one, and
what the balance could look like in 5, 10 and 15 years.

A lower fee with a higher rate can cost more over time. A higher principal limit can matter more than a small fee. We lay these side by side in plain numbers so you can see the trade-offs. Our mortgage calculator is built for regular loans, but it's useful for comparing a reverse mortgage with keeping or refinancing a regular one.

How do you start a cost comparison?

Fill out the loan options form and choose "A reverse mortgage," or call Maggie's cell at (916) 549-3131. We'll ask for the home's address, your ages and any mortgage you have now. Then we'll compare HECM offers across lenders.

Before any HECM, you'll meet with an independent HUD-approved HECM counselor who will also walk through the costs. You're free to choose any lender.

Frequently Asked Questions

What is the HECM mortgage insurance premium?

HUD's Mortgagee Letter 2017-12 set it at an upfront 2% of the maximum claim amount and an annual 0.50% of the outstanding balance, for case numbers from October 2, 2017. Confirm current rates on your Loan Estimate.

What is the maximum origination fee on a HECM?

Under 24 CFR 206.31, the greater of $2,500 or 2% of the first $200,000 of the maximum claim amount plus 1% above that, with a $6,000 ceiling HUD may adjust for inflation. Lenders may charge less.

What is the 2026 HECM limit?

HUD set the 2026 maximum claim amount at $1,249,125 for case numbers assigned January 1 through December 31, 2026, in all areas (HUD news release 25-145, December 11, 2025).

Why does my spouse's age matter?

The principal limit is based on the age of the youngest borrower or eligible non-borrowing spouse. A younger spouse generally means a lower principal limit, but it also protects that spouse's right to stay.

Can I pay down a reverse mortgage?

Yes. A HECM may be prepaid in full or in part under federal rules. Voluntary payments can slow the growth of the balance.

Can the closing costs be paid from the loan?

Most can. The origination fee may be fully financed under 24 CFR 206.31, and other costs are usually paid from the loan at closing. That reduces what's left for you, so compare costs carefully.