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Reverse Mortgages: What Happens When They're Due

As long as you are a senior, aged 62 years or more, you can benefit immensely from reverse mortgages. This unique loan allows you to borrow money against your home’s equity.

Unlike traditional mortgages, you do not have to deposit monthly remittances. Instead, the lender will offer you a lump sum of cash or equal monthly payments.

Interestingly, there is little to no chance of a reverse mortgage foreclosure while still living in the house indicated as your primary residence.

However, this does not mean the lender cannot initiate a foreclosure process. Your reverse mortgage may become due after triggering several factors, as explained below.

Reverse Mortgage Calculator

Get the desired amount as a line of credit or a lump sum. Our reverse mortgage calculator utilizes three key variables - estimated home value, remaining loan amount, and age of the homeowner - to determine how much tax-free cash you can access. By inputting these variables into the calculator, you can get an estimate of the potential funds that may be available to you through a reverse mortgage.

Please update the values in the form
and click calculate.

Check Your Reverse Mortgage Eligibility

What Can Cause a Reverse Mortgage to Become Due?

As you already know, reverse mortgages are not your everyday loans.

They do not require you to remit monthly repayments, meaning your creditor is unlikely to knock on your door for missed payments.

Your reverse mortgage loan will only become due when:

Reverse Mortgage Business team hands at work with financial reports and a laptop

You pass away

Usually, a reverse mortgage becomes due when the borrower dies. Unlike other loans, your heirs are not eligible to take over the loan, meaning the lender will be at liberty to claim the home. If the heirs wish to keep the property, they must pay the loan in full.

Aside from the borrower, the only other person who can enjoy the benefits of a reverse mortgage is an eligible non-borrowing spouse. However, if you wish to include your spouse, you must submit your case during the application process.

You sell the home

When you receive a reverse mortgage, the lender does not expect you to sell the home anytime. After all, your home somewhat acts as collateral even though the Federal Housing Administration usually insures all HCEM loans.

One benefit of taking a reverse mortgage is that you get to keep the title of your property. In essence, your home remains under your name during the duration of the loan.

Selling your property is a triggering factor, and it’s more like a breach of your agreement. The lender will have no choice but to initiate a foreclosure process. The buyer will have to pay off the reverse mortgage before any transfer of ownership.

You move out of the home

When applying for a reverse mortgage, the amount of money you are eligible for is against the value of your primary residence. One of the requirements is that you must live in the home indicated in the loan application as your principal residence for a specified period.

You may have to stay away for unavoidable reasons such as physical illness or cognitive conditions. Some borrowers may have to move to nursing homes, rehabilitation centers, or assisted living facilities to get the help they need.

However, living away from your primary residence for 12 consecutive months might trigger foreclosure, and your reverse mortgage will inevitably become due and payable.

Fortunately, you can avoid this situation if you have an eligible non-borrowing spouse living in the house while you are away.

You miss your homeowners’ insurance or property tax payments

Among the requirements for taking a reverse mortgage is that you must remain updated on any federal debt payments. The chances of qualifying for this loan are minimal if you are delinquent on any debts.

The lender requires you to demonstrate your financial capability to promptly pay homeowners insurance, property taxes, and homeowners association fees as expected to be eligible for a reverse mortgage.

Any missing payments and late submissions may disqualify you from the loan. If you already have a reverse mortgage, the lender might deem your loan due and payable.

You fail to maintain your home

Failure to maintain your home gives the lender the right to foreclose. After all, the amount of money given in a reverse mortgage is equivalent to your home equity. The lender expects your home to appreciate over time so they can claim it when the mortgage is due, sell it off, and recoup their money.

If the home is in a dilapidated state, there is no chance it will appreciate. Instead, it will depreciate, and the loan balance will become higher than the property value.

The mortgage insurance might pay the remaining balance, but this is not always the case if you do not maintain your home deliberately. The lender may opt to list your loan as due to help recover their money.

What Happens Next When A Reverse Mortgage Becomes Due?

When a reverse mortgage becomes due, the lender initiates a foreclosure process. If you are still alive, you can pay off the loan to keep your property. Heirs are not usually eligible to take over the loan, but they can also pay it off in full if they want to keep the home.

Alternatively, you can refinance the reverse mortgage if you meet the minimum requirements. You may also ask for an extension in writing if you need more time to balance your books and repay the loan.

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For more than 20 years, Phil have been helping customers achieve their home purchase and refinance goals by providing them with invaluable resources and support.

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