FAQ – Reverse Mortgage Cost

What is “Total Annual Loan Cost”?

TALC is an acronym for "Total Annual Loan Cost". It is a summary of all the costs associated with a reverse mortgage expressed as an annual rate. The TALC is a useful tool when comparing one reverse mortgage quote to another because these types of loans can vary in terms of features, benefits, and cost. If you are considering a reverse mortgage, ask your lender or counselor to explain what the TALC rates are for the various product options.


What is the Service Fee Set Aside?

The service fee set aside is the dollar amount deducted from your Original Principal Limit and serves to ensure the future payment of your monthly servicing fee.


Why am I charged a servicing fee?

The monthly servicing fee covers the costs associated with administering your reverse mortgage loan. This administration includes:
Providing customer service
Maintaining accurate records of your outstanding loan balance) at all times
Tracking your property taxes
Tracking your hazard insurance
Certifying your occupancy status
Issuing your statements of account
Issuing and collecting payments
Collecting on the loan when it becomes due
Discharging the mortgage


What is a Mortgage Insurance Premium with my HECM reverse mortgage?

The MIP guarantees that if the company managing your account – commonly called the loan “servicer” – goes out of business, the government will step in and make sure you have continued access to your loan funds. MIP guarantees that you will never owe more than the value of your home when the HECM must be repaid.


What is a Repair Rider?

This is your agreement to complete the required repairs within the time frame detailed in that Repair Rider.


What is a “Repair Set Aside”?

The “Repair Set Aside” is the portion of your available funds which are to be used solely for the completion of your required repairs. This “set aside” is not part of your loan balance until which time the funds are actually disbursed.


Will inspections be required to verify the required repairs have been completed?

Yes. Your loan servicer will arrange to have the repair work inspected so as to verify the required repairs have been completed.


 Why do I receive “Occupancy Certificates”?

All reverse mortgages require you to periodically certify that you continue to reside in the mortgaged property as your primary residence.  You must truthfully attest to your occupancy status on this Occupancy Certificate by signing the certificate and returning this Occupancy Certificate to your loan servicer.  Failure to complete this Occupancy Certificate in a timely manner may cause an interruption in your reverse mortgage payments and may eventually lead to a default in the terms of your loan agreement.


Am I required to maintain Hazard Insurance on my mortgaged property?

Yes. You must maintain Hazard Insurance on your property in an amount that is equal to at least 100% of the insurable value of the improvements at the time of your loan closing.


What is an “Insurance Set Aside”?

If you may choose to have your reverse mortgage servicer pays your Hazard Insurance premiums on your behalf, The amount that is required to meet these premium obligations will be “set aside” from your available loan proceeds and will be used for the payment of your Hazard Insurance premiums. These funds do not become part of your loan balance until which time the funds are actually disbursed.


Do I have to carry Flood Insurance in addition to my Hazard Insurance?

If your property is in an area that has been identified by FEMA as having special flood hazards, then you must maintain Flood Insurance in compliance with the Flood Disaster Act of 1973. FEMA will periodically update their Flood Maps and alter the risk of flood associated with your geographic area. If FEMA determines that your geographic area represents a risk of flood, then you must purchase flood insurance to be in compliance with the terms of your Loan Agreement. If you were considered to be in a flood zone at the time of your loan closing, but FEMA updated your geographic area to be a non-risk zone, then you may cancel your Flood Insurance once your loan servicer has been formally notified of the change to your geographic area.


Do I have to pay my property taxes?

Yes, it is your responsibility to ensure that your property taxes are paid in a timely manner.


What is a “Tax Set Aside”?

If you choose to have your reverse mortgage servicer pay your property taxes on your behalf, the amount that is required to meet this tax obligation will be “set aside” from your available loan proceeds and will be used for the payment of your taxes. These funds do not become part of your loan balance until which time the funds are actually disbursed.


Can I participate in a property tax deferral program?

Yes. You may only participate in a property tax deferral program if the lien created by your deferral program is subordinate to your reverse mortgage loan.


May I participate in a tax exemption program?

Yes, tax exemption programs are permitted under the reverse mortgage program.


Can I deduct the interest charges for income tax purposes?

Yes. Interest charges can only be deducted once those interest charges have been paid.


Would I receive a statement of account from my loan servicer? 

Yes.  Your loan servicer must issue to you the following statements:
Statement of account after each line of credit activity.
A Statement advising you of any impending interest rate change that may impact your reverse mortgage.
An annual statement of account by January 31 which details all of your previous year's reverse mortgage account activity 
including the summery of all advances of principal,  all Mortgage Insurance Premiums accrued, 
all interest charges, and all property charges paid in the prior year.