Reverse mortgage closing costs are higher than a conventional refinance, and the reason is mostly one line item: FHA insurance. Here is the full list, in the order it appears on your estimate.
Upfront mortgage insurance premium (UFMIP)
FHA charges an upfront premium calculated as a percentage of your home's appraised value or the lending limit, whichever is lower. This is the largest single cost and it is not negotiable — it is a federal charge, identical at every lender. It buys the non-recourse guarantee and the growing line of credit.
Origination fee
The lender's fee for processing the loan, capped by HUD on a sliding scale tied to home value. This is negotiable and it varies materially between lenders. Some lenders reduce or waive origination in exchange for a higher margin — which is not a discount, just a different payment schedule.
Third-party settlement charges
- FHA appraisal: Required, and must come from an FHA roster appraiser. California costs run higher than the national average, more so for rural Central Valley and mountain properties.
- Title insurance and escrow: In California these are a meaningful share of the total. Rates are filed but escrow fees vary by company.
- Recording fees and county transfer charges: Set by your county recorder.
- Credit report, flood certification, and pest inspection where required.
HUD counseling fee
Charged by the independent HUD-approved agency, not the lender. It is modest, and agencies must serve homeowners who cannot afford it. See our counseling guide.
Ongoing costs after closing
Two charges accrue for the life of the loan: the annual mortgage insurance premium and the servicing fee (many lenders now charge none). Both accrue to the balance rather than being billed monthly.
What you actually pay out of pocket
Almost all of the above can be financed into the loan. Most California borrowers write a check only for the appraisal and counseling. The trade-off is that financed costs reduce your available proceeds and begin accruing interest immediately.
How to compare lenders honestly
Ignore any single number. Compare (1) total closing costs, (2) the margin, and (3) net proceeds available to you at closing. Then look at the Total Annual Loan Cost, which folds costs and rate into one comparable figure.
Our costs page shows current itemized estimates, and the calculator nets costs out of your projected proceeds automatically.
