Questions to Ask Yourself Before You Move Forward - Part 4

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 be obligated to pay the lender more than the loan balance or the current value of the home, whichever is less. When a loan is called due and payable, the reverse mortgage borrower or the borrower’s estate only needs to repay the lesser of either the loan balance or 95% of the home’s appraised value at that time.

Do you know your options for repaying the loan?

A reverse mortgage loan becomes due when the last surviving borrower or remaining eligible non-borrowing spouse passes away, permanently vacates, or sells the home; or if the homeowners fail to meet the loan obligations, which include paying property taxes and insurance, and keeping their home maintained. A borrower can repay the loan balance with proceeds from the sale of the home or by using personal funds to satisfy the debt. 

If you pass away, or permanently leave the home, do you know how your heirs or estate will repay the loan?

After the last surviving borrower or remaining eligible non-borrowing spouse passes away, or permanently leaves the home, there are several different ways the loan can be repaid. The heirs or 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 clear and marketable title to the home through a "deed in lieu of
foreclosure." 

If the borrower’s heirs or estate do not want to take responsibility for selling the property, or purchasing it, the person authorized to act on behalf of the borrower’s estate can provide a "deed in lieu of foreclosure" to the loan servicer and avoid an actual foreclosure.

Do you want someone to inherit your home after you pass away?

Reverse mortgage loans are not assumable and heirs cannot take possession of the home until the debt is satisfied either by repaying the loan with personal funds, funds from the estate, or by obtaining separate mortgage financing, if they qualify for such financing 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.