Title, Recording, and Closing Fees on a Reverse Mortgage
Key Takeaways
- Third-party closing costs usually total $1,000 to $3,000.
- Title insurance is the largest component of these fees.
- These fees are almost identical to what you would pay when refinancing a traditional mortgage.
Aside from the FHA-specific fees (like the Mortgage Insurance Premium) and the lender's origination fee, a reverse mortgage carries the standard "third-party" closing costs you would expect with any real estate transaction.
Because the lender is placing a massive financial lien on your home, they need to ensure the legal paperwork is pristine and that no one else has a superior claim to the property. These fees cover the legal and administrative heavy lifting required to secure the loan.
The Major Third-Party Fees Explained
Expect these fees to total anywhere from $1,000 to $3,000, depending heavily on your state, the complexity of your property's title history, and the size of the loan.
1. Title Insurance
This is usually the most expensive third-party cost. The lender requires a Lender's Title Insurance Policy to protect them in case there is an undiscovered lien (like an unpaid contractor or IRS tax lien), a dispute over property lines, or an error in public records regarding your property's ownership.
The cost of title insurance is heavily regulated by your state's department of insurance and scales with the size of the loan. While you are paying the premium, the policy protects the lender. You may also be offered an optional Owner's Title Policy, though most homeowners already have one from when they purchased the house.
2. Title Search and Examination
Before issuing the insurance, a title company must perform a deep dive into county records. They will verify that you are the sole legal owner and that there are no encumbrances on the property. This involves tracing the deed history back several decades. This fee usually ranges from $150 to $400.
3. Recording Fees
Once the loan closes, the new mortgage document (the Deed of Trust) must be officially recorded with your local county clerk's office. This puts the public on notice that the lender has a lien on the property. Counties charge a fee for this service, usually ranging from $50 to $200 depending on the number of pages in the document.
4. Settlement / Escrow Fee
This is the fee paid to the title company, escrow agent, or closing attorney who handles the actual logistics of closing. They coordinate the signing of the massive stack of paperwork, disburse the funds (paying off your old mortgage, paying the appraiser, and sending you your cash), and ensure all documents are notarized and filed correctly. Expect to pay $400 to $800 for this service.
5. Miscellaneous Fees
You may see small fees for: - Credit Report: ($20-$50) To check your credit history for the financial assessment. - Flood Certification: ($10-$20) To verify if your home is in a FEMA flood zone (which would require flood insurance). - Courier/Wire Fees: ($30-$75) For overnighting documents or wiring large sums of money.
Can These Be Rolled Into the Loan?
Yes. Just like the origination fee and the upfront MIP, almost all of these third-party closing costs can be financed into the reverse mortgage. This means you do not need to pay them out of pocket at the closing table; they are simply deducted from your available loan proceeds.
When reviewing your Good Faith Estimate, don't just look at the lender's origination fee. Look closely at the "Services You Cannot Shop For" and "Services You Can Shop For" sections to understand the total cost of executing the loan.