Because no payments are being made during the entire life of the loan, the closing costs are paid upfront as part of the mortgage. When you combine the closing costs with the exceptionally low interest rate on the loan, it averages out to be a very fair and attractive annual percentage rate assuming the borrower(s) lives in the home for a reasonable period of time. It is a lack of understanding and misinformation that causes borrowers to overreact when it come to the closing costs.

Four scenarios especially need to be considered when it comes to evaluating the cost of a reverse mortgage.

1) If you compare the cost of a reverse mortgage to a traditional mortgage, you will find that the cost of a reverse mortgage in most cases is far less expensive than the traditional mortgage.

2) If you compare the cost of selling your home and moving into another home, you will find the costs and the stress of selling and moving to be far greater than taking out a reverse mortgage.

3) What value do you put on alleviating financial stress and having the ability to live in your home for the rest of your life without ever having to make a payment?

4) How do you value a loan where you are borrowing money at a very attractive rate of interest with no credit or income qualification, no monthly payment, and if you owe more money than the value of the home when the loan comes due the government makes up the difference but if the home is worth more, the difference goes to you or your heirs?