How Do You Pay Back a Reverse Mortgage?
Tuesday, May 16, 2017
in Blog

How Do You Pay Back a Reverse Mortgage?

The answer to this question depends on your specific situation. The Home Equity Conversion Mortgage (HECM), also known as a reverse mortgage, is federally regulated and insured by the Department of Housing and Urban Development (HUD) and the Federal Housing Administration (FHA). HECMs make up the vast majority of reverse mortgages originated in the United States. A HECM allows you to tap into a portion of the equity you’ve built up in your home without having to make monthly mortgage payments.1 A HECM reverse mortgage comes due once the last surviving borrower passes away, sells the house, or permanently moves out of the home.

HUD defines a permanent move as living outside the home for one continuous year. For example, if a borrower is in a nursing home or assisted living for more than twelve consecutive months, this would be considered a permanent move. The loan also comes due if the borrower stops paying property taxes and homeowner’s insurance, or fails to maintain the home according to FHA guidelines.2

Below are some examples to help you determine when a borrower’s loan would become due.2

You are the only borrower on the HECM reverse mortgage and:

  • You live alone
    • The loan becomes due when you die, sell the home, or permanently move out of the home.
  • You live with a spouse or partner
    • The loan becomes due when you die, sell the home, or permanently move out of the home. However, if an eligible non-borrowing spouse (NBS) also lives in the home, the NBS can remain in the home after their loved one’s passing.
  • You live with children, other relatives, or roommates
    • The loan becomes due when you die, sell the home, or permanently move out of the home. It’s important to note that if one of these events occur, and you or your heirs cannot afford to repay the loan, your children, relatives, and/or roommates will likely have to move.

You are a co-borrower on the reverse mortgage and:

  • Your co-borrower has passed away or has permanently moved out of the home, and you are the only borrower still living in the home
    • The loan becomes due when you die, sell the home, or permanently move out of the home.
  • You live with a spouse or partner
    • The loan becomes due when you and your co-borrower have died, sell the home, or permanently move out of the home. “Your co-borrower can continue to live in the home without paying off the loan after you die or move out. Likewise, you can continue to live in the home without paying off the loan if your co-borrower dies or moves out.”
  • You live with children, other relatives, or roommates
    • The loan becomes due when both you and your co-borrower have died, sell the home, or permanently move out of the home. If any of these events occur, and you or your heirs cannot afford to repay the loan, your children, relatives, and/or roommates will likely have to move. “If you or your co-borrower is still living in the home, then your children or other relatives can continue to live there too.”

If you’re interested in learning more about a reverse mortgage and how it works, please use our Reverse Mortgage Calculator or call 800-218-1415.

 

1 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements. Failure to meet these requirements can trigger a loan default that results in foreclosure.

2 Consumer Financial Protection Bureau, When Do I Have To Pay Back A Reverse Mortgage Loan? – consumerfinance.gov, 9/13/16, https://www.consumerfinance.gov/askcfpb/236/when-do-i-have-to-pay-back-a-reverse-mortgage-loan.html.