HOW WILL YOUR REVERSE MORTGAGE LOAN BE REPAID?
A reverse mortgage is a non-recourse loan, which means that the borrower or the borrower’s estate will never have to pay the lender more than the loan amount or the current market value of the home, whichever is less. When a reverse mortgage loan is due, the borrower or the borrower’s estate must pay back the loan balance or 95% of the home’s appraised value at that time, whichever is less.
Do you know your options for repaying the loan?
A reverse mortgage loan is due when the last remaining borrower or eligible non-borrowing spouse dies, moves out permanently or sells the home, or if the homeowners don’t meet their loan obligations, which include paying property taxes and insurance and keeping the home in good shape. The borrower can pay off the loan balance with the money from the sale of the home or with money from other sources.
If you pass away or permanently leave the home, do you know how your heirs or estate will repay the loan?
There are several ways to pay back the loan after the last borrower who is still alive or the last eligible non-borrowing spouse who is still living in the home dies or moves out permanently. The heirs of the estate can:
• Sell the property and use the proceeds to pay the loan balance;
• Use personal funds or gifted money to repay the loan;
• Purchase the property for 95% of its appraised value;
• Provide the lender with a clear and marketable title to the home through a “deed in lieu of foreclosure.”
Suppose the borrower’s heirs or estate don’t want to sell or buy the property. In that circumstance, the person authorized to act on the borrower’s behalf can provide the loan servicer a “deed in lieu of foreclosure” to prevent a true foreclosure.
Do you want someone to inherit your home after you pass away?
Reverse mortgage debts are not transferable. Therefore, heirs cannot move in until the debt is paid off. This can be done by repaying the loan with their own money, using money from the estate, or getting a separate mortgage loan if they qualify for one at that time.
Did you know that you can prepay your reverse mortgage loan?
A borrower may prepay all or part of the outstanding loan balance at any time without penalty.