Title insurance is a closing cost required by HECM reverse mortgage lenders (and all mortgage lenders, for that matter).
Mortgage lenders require title insurance to protect themselves against financial loss in the event of future title disputes. For example, what if another lender is able to prove ten years from now that they have a loan against your home that your current lender missed? This could jeopardize your lender’s interest in your home and result in a significant financial loss. Title insurance is designed to protect against such scenarios.
The cost of title can vary widely depending on how much your home is worth and where it is located. As a general rule, title for a HECM reverse mortgage is more expensive than for traditional home loans. It needs to insure not only the loan amount today, but the loan amount in the future. A reverse mortgage is designed to convert home equity into cash, so it’s a good bet the balance will be significantly higher in the future than what it starts at.
Lenders are required to disclose the cost of all closing costs before you commit to moving forward with a reverse mortgage. If you have any questions about the cost of title insurance (or any other fees), be sure to ask your lender.
Note that it is illegal for lenders to “mark up” the cost of title insurance. Lenders can only pass on the actual cost incurred.
Title fees are typically not an out-of-pocket expense for reverse mortgages taken out on a home you already own. Most lenders are willing to roll the cost into the new starting loan balance.
On the other hand, if you’re purchasing a home with a reverse mortgage (yes, this is possible!), you’ll have to pay the cost of the title insurance out of pocket with your down payment.
Depending on the amount you’re borrowing, the lender you’re working with, and current market conditions, you may be able to negotiate the cost of title insurance (and other closing costs) with your lender. For more information about negotiating fees, check out our article on lender credits.