One of the most frequently asked questions regarding the Reverse Mortgage is “Who pays it back?” To address the issue of who is responsible for paying back a Reverse Mortgage, we must first address when it becomes due.
The timing of when the loan becomes due depends on different situations. These situations determine how the loan is repaid and who is then responsible for paying it back. To make it easier to understand the answer to each question, we have addressed each topic separately. Like our company name says, Reverse Mortgage Answers is committed to ensuring our consumers have the right answers about the Reverse Mortgage. Most importantly, we want to make it easy for you to understand it.
When a Reverse Mortgage Comes Due
You are not required to make payments on a Reverse Mortgage until it comes due. However, you are still responsible for paying property taxes, homeowners insurance, and keeping up the maintenance on your home. As long as you uphold those financial obligations, you can never trigger repayment of the loan unless you sell the home, move out, or unfortunately, pass away. When one of these situations occurs, the loan becomes due and is repaid by either you or your heirs.
If You Sell the Home or Move Out
One of the eligibility requirements for the Reverse Mortgage is that your home must be your primary residence. When your home is no longer your primary residence, which is defined as living in the home for less than six months of the year, your loan becomes due. At this point, you will be responsible for paying it back. Typically, the proceeds from the sale of the home pay back the loan. Any remaining proceeds from the sale are yours or your heirs to keep. Remember, you pay back only what you borrow up to the value of the home, plus any interest that has accrued over time. The government guarantees that you never owe more than the value of the home.
If You Pass Away
Many people worry that their heirs will be left to pay back the loan if they pass away. Heirs have a few options. If they wish to keep the home, they can refinance into a traditional mortgage. They can purchase the house for 95% of the appraised value or how much you owe on the loan- whichever is less. If they want to sell the house, they can use the proceeds from the sale to pay off the loan. Any remaining money is theirs to keep. They also have the option of signing the deed over to the lender and walking away from the home entirely with no responsibility to sell the house or pay the loan.
A Non-Recourse Loan
Government-insured Reverse Mortgages are non-recourse loans. That means, if the home sells for less than what you owe on the loan, FHA insurance will pay the difference – not you, and not your heirs.
Other Repayment Questions
If you have more questions about repayment, it may be easier to give us a call at 1-800-420-5515. One of our Reverse Mortgage Specialists can answer your individual questions and provide answers based on your situation. The best part is that there is no obligation to move forward. We are more than happy to assist.