Total Annual Loan Cost (TALC)

The loan costs may vary between lenders, and may be difficult to understand and compare. The various types of fees and costs may be different with different lenders. According to the federal truth-in-lending law, all lenders must provide borrowers with a total annual loan cost (TALC) figure for a reverse mortgage. With a total figure, it is much easier to compare the costs you will incur between lenders, and you won’t have to try to decipher each individual line item.

The TALC combines all costs into a single average annual rate. When deciding on a reverse mortgage, the TALC is the most important thing you will want to consider when making a decision. By evaluating this figure, you can easily see how much the costs involved in a reverse mortgage can vary between lenders.

The TALC takes more into consideration than the individual, itemized fees; it also takes into account how long you live in your home, and whether the value of the home increases or decreases while you live there. Naturally, since TALC includes all of the upfront fees, your annualized costs will be greater if you will live in the home only for a few years.

The TALC is meant to be an approximation. It makes certain assumptions for the sake of simplicity; for example, it assumes the borrower will request half of their credit line at closing, and it assumes a constant interest rate. If you obtain a reverse mortgage when interest rates are unusually low, your true costs may grow over time.

However, regardless of the TALC calculation, you must also take into account intangible benefits and costs; the opportunity to stay in your home for the rest of your life is something to which you cannot attach a dollar value.

What would you do otherwise, if you were not to take a reverse mortgage? Consider the alternatives. The reverse mortgage may mean the difference between enjoying a comfortable retirement or living in poverty.