When does a reverse mortgage become due?
A reverse mortgage becomes due and payable when the borrower fails to meet the loan obligations or no longer occupies the home as their primary residence. The loan obligations require the borrower to pay for their own homeowners’ insurance, property taxes and maintain their home per guidelines mandated by the Department of Housing and Urban Development (HUD).1
What happens when I pass away?
When the last borrower on the loan permanently leaves the home, the estate or heirs will inherit the home, but there will be a lien on the title. If the heirs want to retain the property, then the full amount of the loan must be paid regardless of property value. The amount due at loan maturity is the principal borrowed plus any accrued interest and mortgage insurance premium.
As a non-recourse loan, lenders can only look to the value of the home for repayment; no other assets can be attached if the loan balance grows beyond the mortgaged home value. The heirs will not be required to pay more than the value of the home at the time the loan is repaid; even if the loan balance exceeds the value of your home provided you or your heirs decide to sell the home.
What happens if I sell my home or move out?
When a borrower sells their home or moves out, their loan obligations are no longer being met and the loan becomes due. Borrowers can use the proceeds from the sale of their home to pay off their reverse mortgage loan.
If you are a homeowner, 62 or older and looking for a way to supplement your retirement income, a reverse mortgage may be right for you. Call (800) 976-6211 to speak with a licensed reverse mortgage advisor to find out how much you may qualify for.
1 You will retain the title and ownership during the life of the loan, and you can sell your home at any time (at which time the loan becomes due). The loan will not become due and subject to repayment as long as you continue to meet loan obligations such as living in the home as your primary residence, maintaining the home according to the Federal Housing Administration (FHA) requirements, and paying property taxes and homeowners insurance. Failing to meet these requirements can trigger a loan default that may result in foreclosure.
2 You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.