Yes — like any loan, a reverse mortgage is repaid, but not through monthly payments. It becomes due when the last borrower sells, moves out permanently, or passes away. At that point the home is usually sold to repay the balance, and any remaining equity goes to you or your heirs.
Video transcript
Hi everybody, this is Miguel Vazquez, the reverse mortgage specialist. Thank you for taking the time to watch this video.
The question I wanted to answer today is: does a reverse mortgage balance need to be paid back to the reverse mortgage company? The answer is yes — the balance does need to get paid back. In its simplest form, a reverse mortgage is a loan, a mortgage. It's money that was lent to the homeowner, and that money does need to get paid back someday.
But it doesn't necessarily have to be paid back by the homeowners themselves. As long as they keep up with their terms — paying their property taxes, their homeowner's insurance, keeping up the maintenance of the home, and continuing to live in and occupy the home — they can simply continue living there.
Who pays a reverse mortgage back?
Take a couple — husband and wife. Say the husband passes away 20 years after they did the reverse mortgage. Now the surviving spouse is the only one left on the program. Let's say another 15 years go by and the wife passes away too. Now both borrowers have passed away, so they don't pay back the balance themselves. So who pays it back? Whoever the home is left to.
In this example, the parents left the home to their children — the heirs. Once the children go through the process and become the official owners of the property, they have two options:
1. Sell the home for fair market value, take the proceeds, pay off the reverse mortgage balance, and keep whatever money is left over.
2. Refinance the home into a more typical mortgage — one where you send in monthly payments. They refinance for the pending balance of the reverse mortgage, use that money to pay off the reverse mortgage, and then make payments to their new lender.
So in that case the homeowners didn't technically pay it themselves; after they passed away, their heirs did — either by selling or refinancing.
Paying it off while you're still living there
Now say the homeowners haven't passed away and they simply want to pay off the reverse mortgage. There's nothing preventing them from doing that — the only thing needed is coming up with the balance. Say they owe $300,000 on the reverse mortgage. If they came up with that money from somewhere, they could go pay off the balance, and then they'd owe nothing on the reverse mortgage. It would be paid off, at zero.
Selling and downsizing
Another way: maybe they want to downsize or relocate — say, leave California and go live in Texas. They can put the home up for sale at fair market value. For example, on a home worth $500,000, they sell for $500,000, use $300,000 of that to pay off the reverse mortgage balance, and keep the remaining $200,000. The reverse mortgage is now paid off, and they can rent, or purchase another home — possibly even using a reverse mortgage again as an option.
So yes — a reverse mortgage does need to be paid back. If you have any questions, please feel free to call me at 562-881-9811. Thank you very much, and I appreciate you watching the video.