When people first hear about a reverse mortgage, one of the first questions they ask is, “Why are the closing costs so high?”
It’s a fair question—and one that deserves an honest answer.
Let’s break it down.
First, What Are the Costs?
There are two main types of costs associated with a reverse mortgage (also called a HECM – Home Equity Conversion Mortgage):
1. Mortgage Insurance Premium (MIP)
- Upfront MIP: 2% of the appraised home value
- Annual MIP: 0.5% of the loan balance, added each year
This premium goes to HUD (the government), not the lender.
2. Closing Costs
These are similar to any other mortgage:
- Origination fee (capped)
- Appraisal
- Title insurance
- Recording and county fees
Typical Total: $12,000–$15,000, depending on your home’s value
Imagine you needed heart surgery. You meet two doctors:
- Doctor A charges you a low price, but you’re unsure about their track record, tools, or whether they’ll be there for you if things get complicated.
- Doctor B is a board-certified specialist, with top-tier training, state-of-the-art technology, and a team of experts who’ll follow your care for years.
Who would you trust with your life?
Reverse mortgages work the same way.
You’re not just paying for a loan—you’re paying for security, protection, and peace of mind. And it’s federally insured.
What Does the MIP Actually Do?
- Guarantees You’ll Never Owe More Than the Home Is Worth
If your home drops in value or you live longer than expected, neither you nor your heirs will be stuck with a bill. MIP makes sure of that. - Keeps Your Line of Credit Secure
The unused line of credit grows over time. This isn’t possible with a regular HELOC. It’s guaranteed—and won’t be frozen even in a financial crisis. - Protects Your Estate
Your heirs can sell the home, keep it, or walk away. No personal liability. That’s the power of a government-backed reverse mortgage.
So Is It Worth It?
Absolutely—if you use the loan the right way.
For many of our clients, the reverse mortgage becomes a strategic tool:
- Reduces the need to pull from 401(k)s (saving on taxes)
- Offers liquidity without selling investments
- Provides a standby buffer for unexpected expenses
- Lets them age in place with dignity and freedom
If you’re looking for a cheap loan, a reverse mortgage might not be the answer. But if you’re looking for a safe, strategic financial tool that will serve you for life, then yes—you get what you pay for.
Just like with a good surgeon.
Want to Learn More?
At Bingo Reverse Mortgage, we specialize in helping seniors use their home equity the smart way. Whether you’re planning for the long haul or want to protect your legacy, we’re here to help.
Let’s talk about your options. You’ll get real answers—and maybe even a little peace of mind.
The post The True Cost of a Reverse Mortgage: Why MIP and Closing Costs Are Worth It appeared first on Bingo Reverse Mortgage.
]]>FUN FACT
More than 338,000 U.S. residents retired to a new home in 2023, a 44% jump from 2022 and the highest number in three years, according to a new report on migration trends.
AARP.org
A Reverse for Purchase (R4P) is a great way to get yourself into the home of your dreams!!
An R4P is a strategic tool that allows adults 55+ (for some loans, otherwise it’s 62) to increase buying power for a new home that fits your needs while eliminating required monthly mortgage payments.
Love Where you Live & Love Having Flexibility
- An R4P can give you more control over where you spend the years that matter most.
- Move closer to family and loved ones.
- Buy in the mountains, on a golf course or wherever your dreams take you.
- Eliminate your monthly mortgage payments.
- Increase buying power for a home previously out of reach.
- Downsize to reduce cleaning and maintenance needs.
- Move into a home more conducive to aging in place.
- Heirs not personally responsible for the loan balance.
Reverse vs Conventional Mortgages
Reverse and Conventional mortgages have a lot in common, but the differences make a difference. Which is better for you?
If you have any questions about how a Reverse for Purchase can elevate your buying opportunities, please contact us—we’d love to help you get into a home you’ll absolutely love!
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Using a Reverse Mortgage can do more than just turn off your mortgage payment, it can be a very beneficial tax strategy – keeping more of your wealth where it belongs—in your pocket.
Here’s an example of how this works:
Let’s say you decide to buy a right-sized home for your retirement at $600,000. You’re able to put down $300,000 from the sale of your previous home, and then take out a Reverse for Purchase Mortgage for $300,000.
STEP 1:
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You let the interest accrue for several years, while the balance is negatively amortizing–until the balance is $360,000.
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If, and when it makes sense during the term of your loan, you would make a voluntary distribution from your IRA for $60,000 which triggers a 1099 as ordinary income.
STEP 2:
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Make a voluntary $60,000 interest payment to your Home Equity Conversion Mortgage – Line of Credit (HECM – LOC), reducing the balance owed to $300,000. That triggers a 1098, as accrued interest–and maybe MIP, depending on congress each year–and is deductible in the year it is paid.
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That would be deductible under current tax rules as mortgage interest (or MIP) on Schedule A and it is well over the $24,000 (or $26,000) standard deduction.
- You may do elective medical, charitable contributions and of course, stack any real estate taxes as well that particular year.
- It may even be possible to withdraw $70,000 or $80,000 instead of just $60,000 depending on other deductions and your income that year.
- At this point you may be concerned that you’ve lost some of your liquidity because of paying that huge interest amount—especially since the whole purpose of a Reverse Mortgage is to increase cash on hand by allowing the equity in your home to decrease—but you still have access to your money. Let us explain.
STEP 3:
- Remember, any payment to a Reverse LOC, even if it is all interest and MIP, allows a dollar-for-dollar increase in the amount that is available to borrow.
- You can take out any or all of the available credit as a tax-free distribution since borrowed funds are not taxable funds.
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In this example, your $60,000 would be available within a few days to withdraw tax-free and you would still be able to get the tax deduction from the 1098.
- Or, another option would be that the $60,000 can stay in the Line of Credit and continue to grow at 5%. If you don’t need the money, you would have roughly $63,000 after a year that could then be partially or fully drawn out tax-free.
- You can do this every 2-4 years–whenever the interest balance substantially exceeds the $24,000 or $26,000 standard deduction that every couple gets whether they have a mortgage or not.
- A substantial amount of IRA distributions can be offset by consistent, voluntary pay-downs of the Reverse Mortgage without ever needing to worry about keeping those funds liquid, because you can borrow some or all of it back at any time, having access to it within a matter of a few days.
There are rules surrounding how long the funds are paid down and taken out —and as issues become more clarified in the TCJA tax code — we strongly encourage that a CPA should be consulted on any tax issue—but this is one way to leverage the money you have locked in your home right now and put it to work for you during your retirement.
If you have any questions about stacking tax deductions with a Reverse Mortgage Loan, please contact us—we’d love to have a conversation with you!
The post Stacking Tax Deductions Using A Reverse Mortgage appeared first on Bingo Reverse Mortgage.
]]>Tuesday, May 16 · 10am – 1:30pm MDT
The Hall at PPLD
20 W Pikes Peak Ave 20 West Pikes Peak Avenue Colorado Springs, CO 80903
Free – Lunch Included!
Discover how a Reverse Mortgage for Purchase can be a smart solution for home buyers 55 and older who want to buy a more appropriate home with a one-time investment of about 60% of the purchase price and never make a monthly payment as long as they live in the home. Bingo Reverse Mortgage is a Colorado veteran-owned and operated business serving our local partners in real estate and lending. This class will show you how to leverage Reverse Mortgage for Purchase to better serve your clientele and also save potential clients large amounts of retirement money. Colorado’s housing market is always evolving and with more than 1/3 of home buyers over the age of 55 this class is essential in serving your business.
Register TodayThe post Colorado Springs Realtors CE Class Reverse for Purchase appeared first on Bingo Reverse Mortgage.
]]>Monday, May 15 · 10am – 1:30pm MDT
12225 N Pecos St 12225 North Pecos Street Westminster, CO 80234
Free – Lunch Included!
Discover how a Reverse Mortgage for Purchase can be a smart solution for home buyers 55 and older who want to buy a more appropriate home with a one-time investment of about 60% of the purchase price and never make a monthly payment as long as they live in the home. Bingo Reverse Mortgage is a Colorado veteran-owned and operated business serving our local partners in real estate and lending. This class will show you how to leverage Reverse Mortgage for Purchase to better serve your clientele and also save potential clients large amounts of retirement money. Colorado’s housing market is always evolving and with more than 1/3 of home buyers over the age of 55 this class is essential in serving your business.
Register TodayThe post Westminster Realtors CE Class Reverse for Purchase appeared first on Bingo Reverse Mortgage.
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Things to know:
- The unused portion of a line of credit grows each year- whether the home’s value increases or not.
- If your client plans to remain in their home, this is a viable retirement funding strategy.
- This is tax free as a Reverse Mortgage is is essentially a loan payment, it is not a taxable event and won’t impact your taxable income or tax bracket.
- Your client can coordinate with with other retirement investments. They can strategically use the funds by coordinating the with their existing retirement investment portfolio. Balance their home asset against their other assets and only draw on reverse mortgage funds during a bare market. When their portfolio is doing fine, spend from there.
- Use reverse mortgage for one partner to stay in their home if the other partner needs assisted living care.
- If your client is struggling, they can downsize with a Reverse for Purchase and move without a principle or interest payment.
- Don’t look at Reverse Mortgage on it’s own, but as a piece of a larger retirement strategy. Your client’s home may very well be their greatest asset. Educate your retirement clients about the various ways to leverage this asset to help them maximize their income. For certain borrowers, a Reverse Mortgage may be a lucrative way to help them spend their golden years with dignity and financial security.
“Growing Pains” Created a Safer, Stronger, Product
Reverse Mortgages have become a stronger product after enduring years of program changes handed down by the Federal Housing Administration. Reverse Mortgages, including the Home Equity Conversion Mortgage (HECM) program, went through a lot of growing pains during their first 25 years.
Improvements made were:
- Only allows borrowers to tap into no greater than 60% of the lending limit in the first year
- Greater security of income and credit
- Required to complete a financial assessment
- Protections for non-borrowing spouses
The benefits should be fully understood alongside potential negative attributes.
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Customize Your Retirement with Reverse Mortgage
Accessing your home equity as a measure of flexibility and another source of retirement income through reverse mortgage can be part of a customized retirement plan.
In retirement, it’s critical to make the most of every resource available and an often-untapped asset is one’s home equity.
When it comes to retirement, no two plans are the same. A great financial plan for you really comes down to three elements:
- Your Goals and Values
- Customization
- Flexibility
One way to help your plan achieve those goals might be to consider a reverse mortgage.
What is a reverse mortgage? Is a reverse mortgage right for me? Do I qualify for a reverse mortgage? Call us today at 720.541.5545 to learn how to use your home equity the smart way.
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