Reverse Mortgage Repayment
Reverse mortgages enable seniors to take advantage of the equity in their homes while still retaining the home as a primary residence. During the life of the loan, no monthly payments are made – in fact, the borrower may receive payments over the life of the loan. But, eventually, the reverse mortgage needs to be repaid.
While reverse mortgage solutions are becoming more familiar to borrowers, little is often known about reverse mortgage repayment. Here, we will walk through the various options for reverse mortgage repayment.
To learn more information about reverse mortgage repayment, please call one of our reverse mortgage experts at Citizens Lending Group at (800) 480-6828 or use our convenient online reverse mortgage calculator to get started.
Reverse Mortgage Payoff
A reverse mortgage differs from other loan products as repayment does not occur via a monthly payment over the life of the loan. Rather, reverse mortgage repayment happens all at once at loan maturity.
In a reverse mortgage, loan maturity occurs when the borrower sells or transfers title to the property, or leaves the home permanently. This can happen if the homeowner moves into a nursing home, a family member’s home, travels for an extended period, or passes away. Reverse mortgage repayment may also be triggered if the borrower defaults on the loan terms.
Reverse Mortgage Repayment through the Sale of the Home
Whenever any of the above instances occur, reverse mortgage repayment is triggered and the mortgage loan becomes due and payable. The most common method of reverse mortgage repayment is the sale of the home. Therefore, the proceeds of the sale are then used to repay the mortgage loan in full. The borrower or his or her heirs typically take responsibility for the sale transaction.
If the home is sold for more than the principal balance of the reverse mortgage loan, the borrower receives the excess cash. If the home depreciated over the course of the loan and is sold for less than the balance of the loan, the borrower is not required to cover the deficit. Reverse mortgage insurance, issued by the Federal Housing Administration (FHA), covers the rest.
Reverse Mortgage Repayment when Keeping the Home
If the borrower or their family does not wish to sell the home, they may instead opt to keep the home and choose another form of repayment. For example, heirs may refinance the reverse mortgage loan into a traditional mortgage, or pay off the reverse mortgage using personal savings or other funds. In some instances, qualifying heirs may refinance the home into another reverse mortgage.
Other Reverse Mortgage Repayment Options
While reverse mortgages are usually paid off at loan maturity, borrowers may make payments towards the mortgage during the life of the loan without penalty. Even if these payments are not used to fully pay off the loan, they will lower the payoff amount due at the end of the life of the loan.
Additionally, there are a number of other flexible reverse mortgage repayment options to fit different financial conditions and lifestyles.
Learn More About Reverse Mortgage Repayment
If you need help understanding reverse mortgage repayment or would like to learn more about the various options available, a friendly representative from Citizens Lending Group can provide you with more information. Call us at (800) 480-6828 to learn more about reverse mortgage requirements or use our online contact form to find out if a reverse mortgage is right for you.
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These materials are not from HUD or FHA and were not approved by HUD or a government agency.