Table of Contents

Total Annual Loan Cost (TALC): What It Is and How It Works

By

澳洲幸运5开奖号码历史查询:Julia Kagan

Updated December 22, 2024

Reviewed by

Doretha Clemon

Fact checked by

Michael Logan

Two women discussing paperwork in front of a laptop at home — Dean Mitchell / Getty Images

Definition

The⭕ total annual loan cost (TALC) is the projected annual cost of a reverse mortgage over its life. It includes interest, principal, closing costs, servicing fees, and mortgage insurance premiums

What Is Total Annual Loan Cost (TALC)?

Total annual loan cost (TALC) is the projected cost that a reverse mortgage holder should expect to pay each year over the life of the loan. The TALC is based on the charges associated with the reverse mortgage, w🐻hich include principal, interes🎃t, mortgage insurance premiums, and closing and servicing costs.

Key Takeaways

Total annual loan cost (TALC) is the projected annual percentage cost of a 澳洲幸运5开奖号码历史查询:reverse mortgage.
The TALC will include costs like origination fees, closing costs, appraisal fees, and mortgage insurance premiums.
Creditors are required to clearly document how they calculate TALC and disclose this to customers.

How Total Annual Loan Cost (TALC) Works

Homeowners taking a traditional mortgage are often presented with a variety of financial statistics to help them understand how much they will ultimately pay for the loan. These stats help the mortgage holder estimate payments and include 澳洲幸运5开奖号码历史查询:good faith estimates, 澳洲幸运5开奖号码历史查询:annual percentage rate (APR), and 澳洲幸运5开奖号码历史查询:truth-in-lending disclosures.

However, reverse mortgages are different from traditional mor🐟tgages and have their own financial terminology and data, including the total annual loan cost.

With a reverse mortgage, TALC is used, rather than APR, to l⛎imit confusion, and it is typically higher than the APR. The cost of ♒a reverse mortgage depends on how long the loan is held and how much the value of the home appreciates. In most cases, the longer the reverse mortgage, the lower the total annual loan cost will be.

Important

The TALC for a reverse mortgage depends on how long the loan is held ꦺand how much the value of the home appreciates.

TALC is calculated under different scenarios, rather than through a straightforward calculation. Ultimately, the borrower must pay back the lesser of the loan balance or property value, with property appreciation being less important in short-term loans.

Longer-term loans with low pr෴operty value appreciation may limit the value of the property. A homeowner seeking a reverse mortgage is generally shown the total annual loan cost rate via a table within a document. The rates are an estimate, and the annual cost may differ depending on the interest rate attached to the loan.

Most reverse mortgages require the applicant to sign a document indicating they have seen and 澳洲幸运5开奖号码历史查询:understood the total annual loan cos🌼t.

Fees Included in TALC

There are multiple fees that must be clearly disclosed in any TALC documentation. All of these costs may b൲e financed as part of the revers♒e mortgage.

These expenses include an 澳洲幸运5开奖号码历史查询:origination fee, which covers a lender's expenses for originating the reverse mortgage, as well as a 澳洲幸运5开奖号码历史查询:mortgage insurance premium paid by the borrower to the feder﷽al government for providing certain loan protections. Lenders also often charge a monthly servicing fee for administering th𒅌e loan.

Fast Fact

As with a traditional mortgage, a reverse mortgage borrower will have to pay an 澳洲幸运5开奖号码历史查询:appraiser for providing a market value of the home, in addition to closing costs, which typically cover fees for documentation preparation, 澳洲幸运5开奖号码历史查询:title search, credit report, home inspecti༺on, and property surveys, among other ไcosts.

A borrower also will be charged interest on the reverse mortgage loan. The interest is compounded, which means🦋 the borrower will pay ongoing interest on the principal, plus accumulated interest.

What Are Total Annual Loan Costs?

Total annual loan cost (TALC) is the estimated annual cost of a reverse mortgage over the life of the loan. TALC is u♒sed in place of APR for reverse mortgages, since the former rate is typically higher than the latter.

What Loan Elements Make Up the TALC for a Reverse Mortgage?

The TALC will include expenses like origination fees, closing costs, 澳洲幸运5开奖号码历史查询:appraisal fees, and mortgage insurance premiums.

Is a Reverse Mortgage a Good Idea for Retirement?

For homeowners who are at least 62 years old, a reverse mortgage is a perfectly viable method to increase the amount of money available to 澳洲幸运5开奖号码历史查询:fund their retirement. However, there are costs, such as closing costs and a servicing fee, and other risks, such a💧s reverse mortgage scams, involved that are cru🍰cial to be aware of before pursuing this option.

The Bottom Line

Total annual loan cost (TALC) is the projected cost that a reverse mortgage holder will pay each year over the life of the loan. The total annual loan ꦬcost is based on the charges assoཧciated with the reverse mortgage, which include principal, interest, mortgage insurance premiums, and closing and servicing costs. TALC for a reverse mortgage depends on how long the loan is held and how much the value of the home appreciates. Lenders must clearly document how they calculate TALC and disclose this to customers.

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