The True Cost of a Reverse Mortgage: Why MIP and Closing Costs Are Worth It
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.
