What Does a Reverse Mortgage Actually Cost?

I am going to be honest with you, because somebody in this conversation should be: a reverse mortgage is neither the miracle the TV commercials suggest nor the trap your neighbour warns about at coffee. It is a tool with a real price tag. Here is the price tag.

The rate is higher. Full stop.

Reverse mortgage rates run noticeably higher than a regular mortgage — that is the price of the lender waiting years for repayment with no monthly payments coming in. Anyone who glosses over this is selling, not advising.

The costs up front

Expect an appraisal, a setup or closing fee, and independent legal advice — that last one is mandatory, and it is there to protect you. It means a lawyer who works for YOU, not the lender, walks you through the contract before anything signs. I consider it a feature, not a hurdle. All-in, upfront costs typically land in the low thousands, mostly paid from the advance itself.

The real cost: compounding

Here is the thing nobody draws on a napkin for you. Because you are not making payments, the interest gets added to the balance, and next year interest is charged on that bigger balance. The debt grows faster the longer it runs. That is not a scandal — it is exactly what "no monthly payments" costs. But it means a reverse mortgage taken at 60 is a very different decision than one taken at 78. Time is the biggest number in this math.

What protects you

You stay on title. You cannot owe more than the home is worth when it sells — that guarantee is built in. You cannot be forced out because the balance grows. And the amount you can borrow is capped well below your home value precisely so the equity does not run dry quickly.

Who it is actually for

The right fit, in my experience: 55 or better, planning to stay in the home for years, house-rich and pension-tight, and either no heirs counting on the full house value or heirs who are at the table and on side. Bring the kids into the meeting — I insist on offering it, and the good lenders encourage it.

The wrong fit: someone who will sell in a couple of years anyway, someone whose real problem is a smaller debt that a regular refinance or equity take-out could clear cheaper, or anyone being pressured. Often the better answer is something simpler — I have talked more people OUT of reverse mortgages than into them, and I sleep fine.

Try the numbers yourself

My free Reverse Mortgage Calculator shows what you could access and how the balance grows over time — no name, no email, no phone call. More questions? The reverse mortgage FAQ covers the ones I hear most.