Table of Contents

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

By

澳洲幸运5官方开奖结果体彩网: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 mortga♕ge over its life. It includes interest, principal, closing costs, servicing fees, and mortgage insuraꦍnce 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, which include principal, interest, mortgage insurance🍷 premiums, and closing and ꧑servicing costs.

Key Takeaways

Total annual loan cost (TALC) is the projected annual percentage cost of a 澳洲幸运5官方开奖结果体彩网: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官方开奖结果体彩网:good faith estimates, 澳洲幸运5官方开奖结果体彩网:annual percentage rate (APR), and 澳洲幸运5官方开奖结果体彩网:truth-in-lending disclosures.

Howeve🎉r, reverse mortgages are different from traditional mortgages 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 limit confusion, and it is typically higher than the APR. The cost of a reverse mortgag🌠e 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 depeౠnꦏds 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 property 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官方开奖结果体彩网:understood the total annual loan ꦬcost.

Fees Included in TALC

There are multiple fees that must be clearly disclosed in any TALC documentation. All o𒊎f these co♋sts may be financed as part of the reverse mortgage.

These expenses include an 澳洲幸运5官方开奖结果体彩网:origination fee, which covers a lender's expenses for originating the reverse mortgage, as well as a 澳洲幸运5官方开奖结果体彩网:mortgage insurance premium paid by the borrower to the federal government for 💝providing certain loan protections. Lenders also ♛often charge a monthly servicing fee for administering the loan.

Fast Fact

As with a traditional mortgage, a reverse mortgage borrower will have to pay an 澳洲幸运5官方开奖结果体彩网: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官方开奖结果体彩网:title search, credit report, home inspection, and🐟 property surveys, amon♋g other costs.

A borrower also will be charged interest on the reverse mortgage loan. The interest is compounded, whic🔯h means the borrower will pay ongoing int💯erest 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 used 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官方开奖结果体彩网: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官方开奖结果体彩网:fund their retirement. However,🌄 there are costs, such as closing costs and a servicing fee, and other risks, 𝕴such as reverse mortgage scams, involved that are crucial 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 cost is based on the charges associated🃏 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 thi🎉s to customers.

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