The four cost categories
- Upfront FHA mortgage insurance premium (MIP)
- Origination fee (federally capped)
- Third-party closing costs
- Ongoing annual MIP and (sometimes) servicing fee
1. Upfront FHA mortgage insurance premium
The upfront MIP is 2% of the lesser of the appraised value or the HUD lending limit. This premium funds the federal insurance that makes the HECM non-recourse — meaning neither you nor your heirs can ever owe more than the home is worth at repayment.
2. Origination fee
HUD caps the origination fee on a sliding scale tied to home value. The fee starts at 2% on the first $200,000 of value, then 1% above that, with a current $6,000 hard cap. Lenders may charge less; many do.
3. Third-party closing costs
Standard items: appraisal, Utah title insurance, escrow / closing fees, recording, credit report, flood certification. These mirror the closing costs on any Utah mortgage. Title insurance in Utah is competitively priced relative to other states.
4. Ongoing annual MIP and servicing
Annual MIP is currently 0.5% of the outstanding loan balance, accrued monthly and added to the balance. Most modern HECMs no longer charge a separate monthly servicing fee.
How costs affect your decision
Reverse mortgages are most cost-effective for borrowers who plan to stay in the home for the long term. If the time horizon is short (under 3–5 years), the upfront MIP rarely pencils — and a HELOC, cash-out refinance, or even simple downsizing may be a better fit. Tres will tell you straight when a HECM does not make sense.