Does Your Reverse Mortgage Need To Be Paid Back
Many of our clients have asked if their reverse mortgage needs to be paid back.. and the answer is YES! Reverse mortgage loans must be repaid either when you move out of the home or when you die. There are few different ways to pay back your reverse mortgage loan. Here are the options below on how to do so.
1. Sell the Home
Once payment comes due, either the borrower or their heirs can decide to simply sell the home to pay off the loan. The proceeds of the sale go first toward paying off the lender. The borrower, or their estate, keeps whatever is left over after paying the debt. Selling the home is still an option, even if the home’s value is lower than the loan’s balance. The Federal Housing Administration (FHA), the agency that backs HECMs, considers the loan terms satisfied if the borrower or heirs sell the home for 95 percent of its appraised value.
2. Refinance The Mortgage
If you’re the borrower and you want to move out but still keep the home, you can refinance your reverse mortgage into a traditional mortgage loan. Just remember that you’ll need to start making payments on the new loan to keep the home.
3. If you’re the borrower and you want to move out but still keep the home, you can refinance your reverse mortgage into a traditional mortgage loan. Just remember that you’ll need to start making payments on the new loan to keep the home.
If the borrower’s heirs want to keep the home, they can simply take out a new mortgage on the house to pay off the balance of the reverse mortgage. This is much like refinancing the loan as the original borrower. The heirs can then use the home however they wish, so long as their mortgage allows for it. For example, they choose to live in the home or use it as an investment property.
